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205 B.R. 437 (1997)
In re Eric Maurice COOK, Debtor.
In re Bryan HOLLAND and Lisa Holland, Debtors.
Bankruptcy Nos. 96-04907, 96-04849.
United States Bankruptcy Court, N.D. Florida, Pensacola Division.
January 29, 1997.
*438 Martin Lewis, Pensacola, FL, for Debtor.
David Bailey, Pensacola, FL, for GMAC.
Leigh Hart, Trustee, Tallahassee, FL.
MEMORANDUM OF OPINION
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
These two cases under chapter 13 of the Bankruptcy Code came on for confirmation over the objections of General Motors Acceptance Corporation (GMAC), the holder of claims secured by the debtors' automobiles. The dispute in these cases and numerous other cases filed by the attorneys representing these debtors centers on whether fees to the debtors' attorneys to be paid under their respective chapter 13 plans must be paid in full before the secured creditors are paid anything.
BACKGROUND
Until recently, chapter 13 debtors and creditors holding claims secured by automobiles routinely entered into adequate protection agreements prior to confirmation of the debtors' plans. A typical agreement in a case in which the claim was to be modified by paying the value of the vehicle over the life of the plan at an appropriate interest rate would provide that the debtor would commence making the payments provided for to that creditor prior to confirmation, with those payments being deducted from the pre-confirmation payments to the chapter 13 trustee. Upon confirmation of the plan, the payments would then be made through the trustee.
In these cases (and numerous others), the debtors' attorneys undertake representation without requiring fees to be paid in advance, but instead agree to receive their fees under the plan. The debtors have objected to any pre-confirmation adequate protection payments being made to the secured creditors based on the concerns that if adequate protection payments are made to the secured creditors prior to confirmation, there will not be sufficient funds on hand in the estate at confirmation to pay the attorneys fees in full. When GMAC filed its motions in these two cases for relief from the automatic stay or for adequate protection, debtors' counsel successfully argued that based on the reasoning of In re Cason, 190 B.R. 917 (Bankr.N.D.Ala. 1995), any payment of adequate protection to the secured creditor prior to confirmation would violate § 1326(a)(2) of the Bankruptcy Code,[1] which requires the trustee to retain all payments proposed by the plan until the *439 plan is confirmed or confirmation is denied. Counsel argued that as long as the debtors made their plan payments, the creditor was adequately protected. However, § 1326(a)(2) also provides that if the plan is not confirmed, the trustee must return the payments to the debtor. In order to insure that the creditor's interest in the collateral was adequately protected, I ordered that the creditor would be granted a lien on the funds paid to the trustee, to the extent of the monthly depreciation of the automobiles, with such funds to be paid to the creditor in the event of dismissal or conversion of the chapter 13 cases.
When these cases came on for confirmation, debtors' counsel, supported by the trustee, took the position that once the plans are confirmed, the creditor is no longer entitled to adequate protection and that the debtors' attorney's fees must be paid first and in full from the funds on hand, even if the secured creditor has to wait until some time after confirmation before it receives anything at all. GMAC objected, taking the position that it was entitled, at the least, to receive the adequate protection payments representing the depreciation of its security and that post-confirmation, it is entitled to continue to receive payments of at least the continuing depreciation on a monthly basis, even if that meant payment of the debtor's attorneys in deferred payments.
DISCUSSION
The issues discussed herein, adequate protection, valuation, and confirmation, are applicable to all chapter 13 cases in which debtors retain collateral that is declining in value. Thus, in addition to ruling on the specific issues before the Court in the above-styled cases, I will use this memorandum of opinion as a vehicle to establish and explain a procedure which will clarify the chapter 13 practice in this district.
I. Adequate Protection
When the issue of adequate protection initially came before the Court upon GMAC's motion for relief from stay, I ruled, in each case, based on the holding in Cason that adequate protection payments are payments under a plan pursuant to Section 1326(a)(2), adequate protection payments made directly to the secured would violate Section 1326(a)(2), and the trustee shall retain all payments made by the debtor until such time as the debtor's plan was confirmed or denied. I granted GMAC adequate protection, in the form of a lien on the proceeds paid to the trustee to the extent of monthly depreciation of the automobiles, to be paid to GMAC upon dismissal or conversion of the case. Upon further reflection, I have determined that my earlier rulings and my reliance upon Cason were erroneous for the following reasons.
Upon filing a petition under chapter 13 of the Bankruptcy Code, a debtor is entitled to remain in possession of all property of the estate, pursuant to Section 1306(b). The automobiles in these cases constitute property of the estate for purposes of Section 1306(b). This right to retain possession is limited. Section 363(e) provides:
Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used, sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest, . . . (emphasis added)
11 U.S.C. 363(e). The Bankruptcy Code does not define adequate protection, but it does provide a non-exclusive list of examples in Section 361. Section 361(1) states that adequate protection may be provided by:
(1) requiring the trustee to make a cash payment or periodic cash payments to such entity, to the extent that the stay under section 362 of this title, use, sale, or lease under section 363 of this title, or any grant of a lien under section 364 of this title results in a decrease in the value of such entity's interest in such property;
11 U.S.C. 361(1).
In summary, section 363(e) authorizes a court to require the trustee to adequately protect creditors whose collateral is declining in value due to its use, sale, or lease. Section 361(1) provides that one form of adequate protection is requiring the trustee to make periodic cash payments to a creditor whose *440 collateral is being retained pursuant to Section 363(e). Further, Section 1303 grants debtors the power of a trustee under Section 363(e). Thus, the plain language of the Bankruptcy Code dictates that a court may require a chapter 13 debtor to make periodic cash payments to an undersecured creditor to adequately protect the creditor against the depreciation of its collateral which is being retained and used by the debtor.
This determination leads to the related question of when creditors are entitled to receive adequate protection payments. In Cason, the court agreed that periodic cash payments are one way to adequately protect a creditor. In re Cason, 190 B.R. 917. However, the court required that the payments be made by debtors to the chapter 13 trustee. The court ruled that adequate protection payments are payments under a plan pursuant to Section 1326(a)(2), and may not be distributed to creditors until confirmation. This view does not appear to be widely shared by other courts.
In In re Ingle, 91 B.R. 27, 28 (Bankr. E.D.Mich.1988), the court considered whether adequate protection payments constitute payments under a plan pursuant to Section 1326(a)(2), and determined that they did not. The court held that secured creditors are entitled to receive adequate protection payments, consisting of debtors' regular monthly loan payment, prior to confirmation. Id. Several other courts, while not expressly considering whether adequate protection payments are payments under a plan, have held that secured creditors are entitled to receive adequate protection payments pre-confirmation to protect them against the decline in value of their collateral. In re Kennedy, 177 B.R. 967, 972 (Bankr.S.D.Ala.1995) (finding that "[a]dequate protection prevents loss to secured creditors during a case by requiring debtors to pay secured creditors for depreciation of their collateral prior to confirmation"); In re Hinckley, 40 B.R. 679 (Bankr.D.Utah 1984) (requiring the debtor to make adequate protection payment directly to a creditor to protect the creditor against depreciation of an automobile); In re English, 20 B.R. 877, 879 (Bankr.E.D.Pa.1982) (finding that the debtor's offer to maintain current monthly payment to a creditor adequately protects the creditor against depreciation of an automobile); In re Brickel, 11 B.R. 353 (Bankr.D.Me.1981) (requiring the debtor to resume monthly payments directly to a creditor, as adequate protection, in order to regain possession of a vehicle); and In re Brock, 6 B.R. 105, 107 (Bankr.N.D.Ill. 1980) (providing that under Section 361(1), adequate protection may be provided by periodic pre-confirmation cash payments from the trustee to the creditor). None of these cases state that adequate protection payments must be made to the trustee, nor do they find that adequate protection payments constitute payments under a plan, pursuant to section 1326(a)(2), which must be retained by the trustee until confirmation. To the contrary, in each of these cases the courts require either the debtor or the trustee to make cash payments directly to the secured creditor prior to confirmation.
Thus, based on the plain language of the Bankruptcy Code and the cases cited above, I hold that adequate protection payments do not constitute payments under a plan pursuant to Section 1326(a)(2), adequate protection payments can be made by debtors or the chapter 13 trustee to secured creditors prior to confirmation, and debtors may deduct the amount of adequate protection payments from their payments to the trustee.
Two related issues are the time when the right to adequate protection begins and the methodology for determining the appropriate amount of adequate protection. Some courts have stated that the right to adequate protection begins upon the filing of the petition or the filing of a proof of claim. However, the majority rule, and the rule used by this Court, is that if adequate protection is granted, it is granted prospectively from the date a motion for relief from stay or a motion for adequate protection is filed. In re Kennedy, 177 B.R. at 973. As for methodology, since the most frequently used and most authoritative source of values for used automobiles is the N.A.D.A. Blue Book, that source can also be used, at least as a starting point, in determining a rate of depreciation for automobiles. In determining the amount of adequate protection a creditor is entitled *441 to receive on its secured claim, absent more reliable evidence, the average rate of decline in the Blue Book value of the particular automobile over a three (3) month period immediately preceding the date of the request for adequate protection should be used. The value to be used should be the average between the retail and wholesale (trade-in) values listed for a comparably equipped automobile with comparable mileage. In re Rowland, 166 B.R. 172 (Bankr.N.D.Fla.1994). This general procedure is provided as an efficient and cost-effective means to arrive at the amount of adequate protection. However, if one or more of the parties believe that this method will not yield an accurate amount of depreciation in a particular case, the party or parties may litigate the issue.
As for the cases sub judice, the Court granted GMAC adequate protection in the form of liens on payments to the trustee to the extent of the monthly depreciation of it collateral, to be paid to GMAC upon dismissal or conversion. As discussed above, this was an incorrect application of the Bankruptcy Code and existing case law. Accordingly, GMAC will retain the adequate protection provided in the Court's earlier orders, with the further proviso that if the Court confirms these cases, the confirmation order will require the trustee to distribute the accrued adequate protection to GMAC upon confirmation.
II. Valuation for Purposes of Adequate Protection
Integral to the determination of the adequate protection issue is the timing of valuation of collateral securing a claim. There are three distinct lines of cases regarding the timing of valuation, each promoting its own theory: (1) the date of filing theory, (2) the effective date of the plan theory, and (3) the multiple valuation theory. In re Cason, 190 B.R. at 924-25; In re Kennedy, 177 B.R. at 971. After carefully reviewing each of the theories, I adopt the multiple valuation approach.[2]
Having adopted the multiple valuation approach, I now discuss how it will be applied for purposes of determining adequate protection. The purpose of adequate protection payments is to compensate a secured creditor for any depreciation of its collateral between the time the creditor moves for relief from stay and confirmation. Thus, technically, the collateral should be valued at the date the secured creditor moves for relief from stay, or moves for adequate protection, and the date of confirmation. Opponents of the multiple valuation approach argue that valuing collateral more than once is costly and burdensome. In re Cason, 190 B.R. 917; In re Kennedy, 177 B.R. 967. However, this is not the case. Local Rule 408 requires chapter 13 debtors, upon the filing of schedules and statement of affairs, to notify all secured creditors in writing of the value, and the debtor's basis or justification for the values shown, of the collateral which secures their claim as set forth in the schedules.[3] L.R. 408. Since most motions for relief from stay are filed shortly after a petition if filed, it will be presumed that the valuation established pursuant to Local Rule 408 is in effect on the date relief from stay is requested.[4] The amount of adequate protection payments will be determined as discussed above. At confirmation, the filing date valuation, or relief from stay valuation if the filing date valuation proved inaccurate, will be reduced by the aggregate amount of adequate protection payments made to the secured creditor, and the remaining amount will be the value of the secured creditor's claim for confirmation purposes.
III. Confirmation
Section 1325(a) provides that a plan can be confirmed over the objection of a secured creditor if:
*442 (5) with respect to each allowed secured claim provided for by the plan
(B)(i) the plan provides that the holder of such claim retains the lien securing such claim; and
(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; . . . and
(6) the debtor will be able to make all payments under the plan and to comply with the plan.
11 U.S.C. § 1325(a). Once a plan is confirmed, Section 1326(b) provides that administrative expenses must be paid before or at the time of each payment to creditors under the plan. The debtors' position is that if the technical requirements of Sections 1325(a)(5)(B) and (6) are met, then the plans should be confirmed and attorney's fees should be paid prior to any payments to creditors.
The issue that arises is what happens when a plan comes on for confirmation, but is insufficiently capitalized to pay attorney's fees in full upon confirmation and to begin paying secured creditors at least the amount of depreciation of collateral. Stated differently, does a secured creditor retain the lien securing its claim, for purposes of Section 1325(a)(5)(B)(i), if it will not receive any payments under the plan for a period of time after confirmation while its collateral continues to depreciate. The debtors' position appears to be that the secured creditor does retain its lien under 1325(a)(5)(B)(i) because under section 1325(a)(6), the Court must find that the debtors will be able to make all of the payments under the plan in order to confirm the plan. Thus, the debtors argue, the plan should be confirmed and attorney's should be paid in full before payments to creditors commence. This position is unpersuasive for the following reasons. Section 1325(a)(6) requires a court to find, by a mere preponderance of the evidence, that a debtor will be able to make all of the payments called for under a plan. However, a preponderance of the evidence is a far cry from a guarantee of payment. Undoubtedly, the creditor, when it made the loan, determined by at least a preponderance of the evidence that the borrower was creditworthy. Look what happened! The purpose of security for a loan is to protect against the possibility that the creditor's initial evaluation of credit-worthiness or the court's finding of an ability to pay were wrong. Thus, a court's finding, by a preponderance of the evidence, that a debtor will be able to make all payments called for under a plan is not sufficient to vitiate Fifth Amendment concerns regarding takings and just compensation.
Several courts have considered the risk that is placed upon secured creditors by plans which delay payments to secured creditors until all administrative expenses, including attorney's fees, are paid in full as a confirmation issue. E.g. In re Parker, 15 B.R. 980, 984 (Bankr.E.D.Tenn.1981) (stating that a court should consider, before or at the time of confirmation, the risk that if payments to secured creditors are delayed and the plan fails, the secured creditor will receive less than the amount of depreciation of its collateral), aff'd, 21 B.R. 692 (E.D.Tenn. 1982). Courts have generally confirmed plans where the secured creditors will begin receiving, upon confirmation, an amount at least equal to the amount of the depreciation of their collateral. E.g. In re Methvin, 11 B.R. 556, 558 (Bankr.S.D.Miss.1981), aff'd, 31 B.R. 569 (S.D.Miss.1982).
However, in cases where the plans provide no payments to secured creditors whose collateral is depreciating until attorney's fees are paid in full, courts have been less likely to confirm the plans. In In re Johnson, the court held that to be confirmed, a plan must deal fairly with secured creditors and provide them adequate protection not only as of the date of confirmation, but on an ongoing basis.[5]In re Johnson, 63 B.R. 550, 554 (Bankr. D.Col.1986) (denying confirmation where a secured creditor with a depreciating automobile *443 as collateral would not receive payments for 3½ years while administrative expenses are paid first); see also In re Lum, 1 B.R. 186, 187 (Bankr.E.D.Tenn.1979) (stating that a secured creditor can demand that a plan adequately protect it by requiring payments at least equal to monthly depreciation of its collateral). In In re Shorb, 101 B.R. 185, 187 (9th Cir. BAP 1989), the Ninth Circuit BAP ruled that the bankruptcy court abused its discretion in ordering attorney's fees to be paid six months after confirmation when the plan did not so provide. The dissenting judge stated that such an approach would obligate courts to deny confirmation of plans which provide that attorney's fees must be paid in full prior before payments to creditors who are becoming further unsecured by continued depreciation of its collateral. Id.
In the cases at hand, the issue of the payment of attorney's fees is intertwined with confirmation. As mentioned above, Section 1326(b) requires the payment of administrative expenses "[b]efore or at the time of each payment to creditors under the plan . . ." Thus, the Bankruptcy Code does not require attorney's fees to be paid in full prior to payments to creditors, it simply requires that they be paid before or contemporaneously with payments to creditors. In re Shorb, 101 B.R. at 186.
Based on the foregoing, I have determined that as a rule, a plan can not be confirmed over objection unless it provides that, upon confirmation, each secured creditor will receive a payment at least equal to the amount of depreciation over the relevant time period. A plan which does not include such treatment does not provide that the secured creditor retains its lien pursuant to Section 1325(a)(5)(B)(i). If this cannot be accomplished while also allowing attorney's fees to be paid in full before commencement of payments to secured creditors, the debtor will be faced with a choice between paying attorney's fees over a longer period of time under the plan on the one hand, and dismissal or conversion on the other.
As for the cases sub judice, the trustee is ordered to file a report in each case detailing the amount of payments which have been paid thus far. In each case, if the payments to date are sufficient to pay GMAC its accrued adequate protection upon confirmation, pay all administrative expenses upon confirmation, and to immediately commence making payments to GMAC in an amount at least equal to the monthly depreciation which has previously been established, then the case shall be confirmed. If the above criteria are not met, then the debtor or debtors will be granted an opportunity to amend their plan(s) in the manner specified herein.
IV. Policy Arguments
The debtors and the trustee have also argued that attorney's fees should be paid before any payments are made to secured creditors on policy grounds. Their basis of their argument is that it is Congress' intent to encourage the use of Chapter 13. This the court does not dispute. The debtors then state that the practical effect of requiring any payment to secured creditors before attorney's fees are paid in full is that fewer attorneys would be willing to receive their fees under debtors' plans, and thus, fewer chapter 13 cases would be filed.
The court in In re Tenney recognized this very argument while holding that attorney's fees should be paid before payments to creditors because "[d]elaying the payment of these expenses discourages rather than encourages the use of Chapter 13 relief." In re Tenney, 63 B.R. 110, 111 (Bankr.W.D.Okla. 1986). However, the court also recognized that "it may be unfair to force creditors to wait for their payments while their collateral continues to be used, and depreciated by debtors" and stated that the outcome of the case might have been different if the collateral was depreciating value. Id.
In these cases, it is undisputed that the automobiles are depreciating value. It is possible that the secured creditor could wait for several months before receiving any payments if attorneys' fees are to be paid in full before any payment to creditors. A court which faced similar facts has stated that:
There is no reason that has been addressed to this Court to show why the attorneys who present thinly funded plans should not share in the risk of possible failure thereof and thereby be encouraged *444 to scrutinize all plans even more closely. Where plan payments are small and payment of fees out front will delay payments to creditors for many months, the sharing of risk and encouragement of more scrutiny will be served by spreading out payment of attorneys fees over time, at least over the early months of the plans while the debtor and creditors also get some benefit from monthly payments that apply partly to debts.
In re Lanigan, 101 B.R. 530, 533 (Bankr. N.D.Ill.1986).
Borrowing from the principles espoused in these two cases, secured creditors should not be required to fund debtors' plans and pay debtors' attorney's fees, in effect, with the depreciation of their collateral. If the risk of non-payment of the debtors' attorney's fees under a plan is too great to justify taking the case if the secured creditors must be adequately protected, then that should tell the attorney something about the case.
V. Conclusion
The Chapter 13 plans presently before the court cannot be confirmed over the objections of GMAC, unless, at the time of confirmation, GMAC receives all accrued adequate protection payments received by the trustee prior to confirmation. Furthermore, after confirmation, distribution to GMAC in an amount at least as much as the monthly depreciation must commence immediately, regardless of whether or not the debtors' attorney's fees have been paid in full.
If the trustee has sufficient funds on hand to make payments to GMAC as required hereunder and to pay administrative expenses, including debtors' attorney's fees, then the plans may be confirmed. Otherwise, confirmation shall be denied.
Separate orders shall be entered in accordance herewith.
NOTES
[1] 11 U.S.C. §§ 101 et seq. (1996). For administrative convenience, all references to the Bankruptcy Code will be by section and number.
[2] Both the Cason and Kennedy decisions contain a comprehensive analysis of the different lines of cases. For the sake of judicial economy, such an analysis has not been replicated herein.
[3] Local Rule 408 also provides that if the secured creditor disputes the amount of the debtor's valuation, it can file, within 20 days of the debtor's notice, a motion to value collateral pursuant to Bankruptcy Rule 3012, and have the Court determine the valuation.
[4] This will almost always be accurate. However, if a party disputes the accuracy of the L.R. 408 valuation at the time the motion for relief from stay is filed, it can litigate the issue.
[5] The Johnson court is not talking about Section 363(e), pre-confirmation adequate protection. Rather, the court is referring to its position that a secured creditor must be adequately protected, post-confirmation, by payments at least equal to the amount of depreciation in order to protect the creditor from diminution in the value of its lien.
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205 B.R. 638 (1996)
In re FEDERAL ROOFING CO., INC., Debtor.
Bankruptcy No. 95-41115.
United States Bankruptcy Court, N.D. Alabama, Eastern Division.
December 17, 1996.
*639 Charles Martin, Gadsden, AL, for debtor-in-possession.
Stephen Porterfield, Birmingham, AL, for General Motors Acceptance Corporation.
Marvin Franklin, Birmingham, AL, for Hinkle Metals and Supply Co., Inc.
Robert Landry, for Bankruptcy Administrator.
MEMORANDUM OPINION AND ORDER
JAMES S. SLEDGE, Bankruptcy Judge.
This case came before the Court on November 14, 1996, for a hearing on the Bankruptcy Administrator's motion to dismiss or convert the case pursuant to 11 U.S.C. § 1112(b). This Court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334(a). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). The Court must determine whether the case should be dismissed or converted to one under Chapter 7 and if, and to what extent, sanctions should be imposed for the conduct of the debtor-in-possession, attorney acting on behalf of the debtor-in-possession, and the accountants acting on behalf of the debtor-in-possession.
Appearing at the hearing were Charles Martin, Esq., attorney appearing on behalf of the debtor-in-possession, Robert Landry, Esq., for the Bankruptcy Administrator, Stephen Porterfield, Esq., for General Motors Acceptance Corporation (GMAC), and Marvin Franklin, Esq., for Hinkle Metals and Supply Co., Inc. No testimony was offered. Ten (10) exhibits, consisting of operating reports filed by the debtor-in-possession, were admitted into evidence without objection. At the hearing, the Bankruptcy Administrator, GMAC, and the debtor-in-possession advocated dismissal. Hinkle Metals and Supply Co., Inc., an unsecured creditor, advocated conversion. For the reasons discussed below, the Court orders that the case be converted to Chapter 7.
FINDINGS OF FACT
Federal Roofing Co., Inc., (hereinafter referred to as "debtor-in-possession") filed its Chapter 11 bankruptcy petition on May 8, 1995. An Operating Order was entered on that same date ordering the debtor-in-possession to file monthly and quarterly operating reports and a report regarding the status of the disclosure statement and plan if the disclosure statement and plan has not been filed within 120 days after the filing of the petition.[1]
*640 The debtor-in-possession has filed two reports to the Court regarding the status of the disclosure statement and plan. The last report was filed on or about April 25, 1996, more than six (6) months ago, stating that the debtor-in-possession expected to file a plan and disclosure statement within ninety (90) days. No such plan and disclosure statement was filed within the time specified in the report. Indeed, no plan or disclosure statement has ever been filed.
The debtor-in-possession also engaged in a number of unauthorized transactions. According to the operating reports filed in the case, the debtor-in-possession has participated in a large number of transactions that involve receiving and disbursing funds to "J. Crain" or "Jenny Crain". Ms. Crain is the daughter of the principal and chief executive officer. Ms. Crain is an insider as that term is defined in 11 U.S.C. 101(31)(B)(vi).[2] These payments and receipts include:
February, 1996 Paid to debtor-in-possession from J. Crain $82,034.25.
March, 1996 Paid to debtor-in-possession from J. Crain $48,896.55.
April, 1996 Paid to debtor-in-possession from J. Crain $47,946.60.
April, 1996 Paid to J. Crain from debtor-in-possession $64,755.74.
May, 1996 Paid to debtor-in-possession from J. Crain $46,533.69.
May, 1996 Paid to J. Crain from debtor-in-possession $45,823.92.
June, 1996 Paid from J. Crain to debtor-in-possession $58,389.70.
June, 1996 Paid to J. Crain from debtor-in-possession $55,765.24.
July, 1996 Paid to debtor-in-possession from J. Crain $53,373.60.
July, 1996 Paid to J. Crain from debtor-in-possession $40,449.70.
August, 1996 Paid to debtor-in-possession from J. Crain $71,727.00.
August, 1996 Paid to J. Crain from debtor-in-possession $91,747.56.
It appears to the Court that the debtor-in-possession was involved in some financing arrangement with the insider wherein large amounts of funds were transferred between the debtor-in-possession and the insider. The debtor-in-possession described the transactions as simply "post-petition financing". No court approval for post-petition financing was ever sought or granted and no order was ever issued approving the transfers. In addition, no notice to creditors was ever provided wherein they might object to this "financing". No evidence was presented that this "financing" was in the ordinary course of business for the debtor-in-possession. At the hearing, counsel for the debtor-in-possession suggested that these were "paper transfers" with few funds actually changing hands. No credible explanation has been given.
In addition to the above unauthorized uses of estate funds, a review of the case file reveals several inadequacies in regard to the employment of professionals. The debtor-in-possession did not file an application to employ counsel. Consequently, there is no order approving debtor-in-possession's employment of counsel. The debtor-in-possession did not file an application to employ accountants. Consequently, there is no order approving the debtor-in-possession's employment of accountants.[3] Even though there was no order approving the employment of professionals, the operating reports reveal that the debtor-in-possession employed these professionals anyway.
The operating reports also reveal several inappropriate uses of estate funds in regard to professional fees. The debtor-in-possession did not file an application to compensate professionals. The Court has not issued an order approving any compensation to be paid to either counsel or accountants. Despite no Court authorization, the debtor-in-possession has compensated professionals in this case *641 several times since the filing of the petition. According to the operating reports, which were admitted into evidence without objection, the debtor-in-possession made several payments to accountants. These payments include:
August, 1995 Paid $40.00.
October, 1995 Paid $195.00.
January, 1996 Paid $45.00.
March, 1996 Paid $600.00.
May, 1996 Paid $624.00.
These payments total $1,504.00. No application was made seeking approval of payment and no order was issued approving these payments. Likewise, according to the operating reports, the debtor-in-possession also made several legal payments.[4] These payments include:
August, 1995 Paid $208.50.
January, 1996 Paid $2,500.00.
February, 1996 Paid $2,500.00.
March, 1996 Paid $2,500.00.
These payments total $7,708.50. The total amount of professional fees paid post petition equals approximately $9,212.50.[5]
CONCLUSIONS OF LAW
The issue confronting the Court is whether this case should be dismissed or converted and whether any sanction should be imposed for the payment of unauthorized professional fees. Before the Court need addresses the fees issue, it must first determine whether the case should be dismissed or converted.
I. Dismissal or conversion.
Section 1112 governs the dismissal or conversion of a case in Chapter 11. Subsection (b) of that section governs dismissal upon request of a party in interest. That section provides in part:
(b) Except as provided in subsection (c) of this section, on request of a party in interest or the United States trustee or bankruptcy administrator, and after notice and a hearing, the court may convert a case under this Chapter to a case under Chapter 7 of this title or may dismiss a case under this Chapter, whichever is in the best interest of creditors and the estate, for cause, including
(1) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation;
(2) inability to effectuate a plan;
(3) unreasonable delay by the debtor that is prejudicial to creditors;
These are only some of the grounds set out in the Code. Proof of any one of the factors listed under § 1112(b) is sufficient to warrant and justify conversion. In re Route 202 Corporation, 37 B.R. 367 (Bankr.E.D.Pa. 1984). The Court is not limited to the specific grounds set out in the section. Section 1112(b) of the Code permits a bankruptcy court to convert or dismiss a case for "cause". The section provides ten enumerated examples which constitute statutory cause, but the list is not exhaustive. In the Matter of Berryhill, 127 B.R. 427, 430 (Bankr.N.D.Ind.1991). Courts have wide latitude in determining whether cause exists to convert or dismiss. In the Matter of Koerner, 800 F.2d 1358 (5th Cir.1986). Cause may be determined from the facts and circumstances of the case. First National Bank of Sioux City v. Kerr (In re Kerr), 908 F.2d 400, 404 (8th Cir.1990). The pertinent legislative history states, "The court will be able to consider other factors as they arise, and use its equitable powers to reach an appropriate result in individual cases." H.R.Rep. No. 595, 95 Cong., 1st Sess. 406 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6362. Accordingly, the determination of cause under § 1112(b) is "subject to judicial discretion under the circumstances of each case." In the Matter of Nancant, Inc., 8 B.R. 1005, 1006 (Bankr.D.Mass.1981).
From the evidence presented, the Court determines that cause exists on several grounds for conversion or dismissal. First, this case has been pending for 18 months.[6] Since the filing of the petition, the debtor-in-possession has yet to submit a disclosure *642 statement and plan for approval. The debtor-in-possession has filed several reports to the Court regarding the status of the disclosure statement and plan. The last report was filed on or about April 25, 1996 stating that the debtor-in-possession expected to file a plan and disclosure statement within ninety (90) days. The debtor-in-possession did not comply with this report as no plan and disclosure statement was filed within the time specified in the report.[7] The debtor-in-possession's failure to file a plan over long periods of time "can be evidence of no prospect for reorganization and an inability to effectuate a plan under 11 U.S.C. § 1112(b)(1), and (2) . . ." In re Powell Brothers Ice Company, 37 B.R. 104, 106 (Bankr.D.Kan.1984). See In re Tornheim, 181 B.R. 161 (Bankr.S.D.N.Y.1995) (failure to file a plan after 16 months warranted dismissal); Hall v. Vance, 887 F.2d 1041 (10th Cir.1989) (failure to file plan within 8 months); In re Koerner, 800 F.2d 1358 (5th Cir.1986) (failure to file plan and disclosure statement within 16 months). There are cases that gave as little as five months for the debtor-in-possession to file a plan before the bankruptcy court ordered the case converted to Chapter 7. In re Photo Promotion Associates, Inc., 47 B.R. 454 (S.D.N.Y.1985).
The Court does not adhere to a hard and fast rule requiring a plan and disclosure statement by a set period of time but instead believes the length of time necessary to file a plan and disclosure statement should be determined on a case by case basis. In this case, the case has been pending for 18 months. This case does not appear to be overly complex requiring an extraordinary amount of time to develop and propose a plan. Nothing was presented to the Court that would explain or justify the amount of time that has transpired without a plan or disclosure statement. The Court determines that this lengthy amount of time evidences no prospect for rehabilitation and the debtor-in-possession's inability to effectuate a plan. Dismissal or conversion is warranted on this ground alone.
Secondly, the debtor-in-possession's practice of maintaining an on going financial transaction with an insider constitutes a breach of the debtor-in-possession's fiduciary duty to the estate. 11 U.S.C. § 364(b)[8] governs obtaining credit not in the ordinary course of business.[9] That section expressly requires notice and a hearing. The debtor-in-possession did not notify anyone of this practice of getting payments from the insider or of repaying same. The Court certainly never approved the practice. These unapproved transactions represent a disregard for proper Chapter 11 case administration.
The transactions involved here represent a misuse of estate funds and breached the fiduciary duty owed by the debtor-in-possession to the estate and its creditors. In Matter of NuGelt, Inc., 142 B.R. 661 (Bankr. D.Del.1992). In the NuGelt case, the debtor-in-possession also conducted unauthorized financial transactions. The court held:
[The creditor and the trustee] argue that these so-called operating expenditures are a misuse of estate funds which is both a breach of the debtor-in-possession's fiduciary duties to the estate and its creditors, and beyond the power of this court to approve. The court finds section 1112(b) cause based on misuse of estate funds and other breaches of the debtor-in-possession's fiduciary duty to the estate and its creditors.
The debtor-in-possession is a fiduciary to the estate and its creditors. "[I]f a debtor remains in possession that is, if a trustee is not appointed the debtor's directors bear essentially the same fiduciary obligation to creditors and shareholders as would the trustee for a debtor out of possession. Indeed, the willingness of courts *643 to leave debtors in possession `is premised upon an assurance that the officers and managing employees can be depended upon to carry out the fiduciary responsibilities of a trustee.'" Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 355, 105 S. Ct. 1986, 1994, 85 L. Ed. 2d 372 (1985) (citing Wolf v. Weinstein, 372 U.S. 633, 649-52 & 651, 83 S. Ct. 969, 979-808, 980, 10 L. Ed. 2d 33 (1963)). Failure to comply with these obligations may be cause for dismissal. In re Wells, 71 B.R. 554, 557 (Bankr.N.D.Ohio 1987).
The hallmark of a trustee is accountability and segregation of funds. These rules are reflected in the requirements (for example) that the debtor-in-possession open a separate debtor-in-possession account, file monthly debtor-in-possession statements with the United States Trustee and obtain court approval for transactions out of the ordinary course.
Id. at 666. The Court is in agreement with the holding in NuGelt. A Chapter 11 debtor as debtor in possession has certain fiduciary duties, a dereliction of which could subject the case to dismissal or conversion. In re Wells, 71 B.R. 554, 557 (Bankr.N.D.Ohio 1987) (transferring property of the estate in a manner not consistent with the Bankruptcy Code or an order of the court may subject the case to dismissal or conversion).
A third ground exists for dismissal or conversion. The debtor-in-possession's practice in regard to the hiring of professionals also warrants dismissal or conversion. Section 327(a) requires court approval before a professional may be employed.[10] This section is applicable to debtors-in-possession. 11 U.S.C. § 1107(a).[11] In order to satisfy § 327, the debtor-in-possession must file an application with the court pursuant to Rule 2014(a). Rule 2014 also requires a "verified statement . . . setting forth the person's connections" to the debtor, creditors, and other parties in interest.[12] As above, the debtor-in-possession disregarded this practice in proper Chapter 11 administration. There was no application filed before the debtor-in-possession employed an attorney or accountants. The Court was not given the opportunity to perform its critical functions in regard to the employment of professionals.[13] The debtor-in-possession's disregard of the proper procedure in the employment of professionals constitutes cause warranting dismissal or conversion.
Dismissal or conversion is also warranted for the debtor-in-possession's payment *644 of legal and accountant fees post-petition without court approval. From the facts stated above, the debtor paid its unauthorized attorney $7,708.50 and its unauthorized accountant $1,504.00. Section 330(a) provides the substantive basis for the attorney of the debtor-in-possession to receive compensation. The section sets out the factors for the court to consider in awarding fees while Rule 2016 sets out the procedural mechanism which the attorney must follow to receive compensation. Rule 2016 requires a detailed statement of services performed, time expended, and the expenses incurred, and request a specific amount to be paid. In addition, the application must include all payments already received or promised and the source of those payments. Agreements relating to sharing of compensation must also be disclosed in the fee application.[14] Again, the debtor-in-possession did not comply with the Code and Rules in regard to the fee payments. Neither the attorney nor the accountant filed an application to be compensated. The Court and creditors were not given the opportunity to review the fees paid or to determine if such fees were reasonable and compensable. This failure to seek court approval for payments to professionals represents cause for dismissal or conversion. In re 3868-70 White Plains Rd., Inc., 28 B.R. 515 (Bankr.S.D.N.Y.1983).
As stated above, the debtor-in-possession's failure to file a plan and disclosure statement and its utter disregard of its fiduciary responsibilities and the mandates of the Bankruptcy Code and Rules constitute cause warranting dismissal or conversion. The Bankruptcy Administrator and the debtor-in-possession advocated dismissal while the only unsecured creditor at the hearing advocated conversion. The Court is in agreement with the unsecured creditor. The Court believes that it would be in the creditor's and the estate's best interest to convert this case to one under Chapter 7. Such conversion will result in a trustee being appointed who will be able to go into this case and determine what may be recovered for the benefit of the estate.
Having found that the case should be converted, the Court must do something, at least in regard to the professional fees, to return some of the misused estate funds to the estate. As stated above, the Code sets out specific rules for professionals to comply with in order to be compensated. Absent compliance with the Code and Rules, an attorney has no "absolute right" to an award of compensation. In re Anderson, 936 F.2d 199 (5th Cir.1991). This is particularly true when the attorney fails to seek prior approval of employment. Id.
In the absence of compliance with the Code and Rules, the Court believes that where fees have been paid to an unapproved attorney, the return of the compensation is the most appropriate remedy. In re Land, 943 F.2d 1265 (10th Cir.1991); In re Placid Oil Co., 158 B.R. 404 (N.D.Tex.1993). The failure of counsel to follow the requirements of the Code and Rule is grounds for requiring a return of any funds paid. In re Chapel Gate Apartments, Ltd., 64 B.R. 569 (Bankr.N.D.Tex.1986).
*645 In the Land case, the Tenth Circuit held that return of compensation was the appropriate remedy where debtor-in-possession failed to obtain court approval before payment to counsel. This remedy was appropriate even in absence of determination that fees were excessive. The fees were ordered disgorged on the Court's own initiative. In the case at bar, the Bankruptcy Administrator requested disgorgement of fees in his motion to dismiss or convert. See also Willis v. Cruse (In re Samford), 125 B.R. 230 (E.D.Mo.1991); In re Prime Foods of St. Croix, Inc., 80 B.R. 758 (D.V.I.1987).
Having determined that disgorgement is the appropriate remedy, the issue becomes of where to direct the professionals to pay the fees. The Court believes that these funds should be paid to the Chapter 7 estate. In In re Pannebaker Custom Cabinet, Corp., 198 B.R. 453 (Bankr.M.D.Penn.1996), the court ordered the Chapter 11 case converted to one under Chapter 7. The court conducted an investigation into various payments which debtor's counsel received from the debtor without prior notice to interested parties or approval of the bankruptcy court. The court concluded that the attorneys would be required to disgorge these funds. There was also unauthorized funds paid to debtor's accountants which the court also required part disgorgement. The court ordered that the disgorged funds be turned over to the Chapter 7 trustee. In In re Larsen, 190 B.R. 713 (Bankr.D.Me.1996), the court also converted the case to Chapter 7 and ordered disgorgement. The debtor's attorney received payments for legal services from the debtors without Court authority. The Chapter 7 trustee investigated and filed an objection to any fees being paid to counsel. The Court ordered that the funds paid by the debtors be disgorged to the Chapter 7 trustee.
In order to remedy the improper payment of professional fees, the Court believes the professional fees paid by the debtor-in-possession should be turned over to the Chapter 7 trustee. The professional fee payment process set out within the Code is designed to protect the debtors-in-possession, creditors, and other parties in interest. Professionals will not be allowed to profit when they blatantly violate the provisions of the Code and Rules.
CONCLUSION
From the facts established at the hearing, it is clear that the debtor-in-possession engaged in a practice that is completely contrary to the policy of Title 11. The debtor-in-possession failed to follow the clear mandates of Chapter 11 administration. The debtor-in-possession allowed a non-complex case to pend for over 18 months without filing a plan or disclosure statement. The debtor-in-possession engaged in a practice of exchange of payments with an insider without notice to any party or Court approval. The debtor-in-possession employed professionals without Court approval in violation of § 327(a) and Rule 2014. The debtor-in-possession paid these professionals post petition without Court approval in violation of § 330 and Rule 2016. Any of these grounds might have been sufficient to constitute cause warranting dismissal or conversion. Taken all together, they clearly demonstrate the case should be dismissed or converted. Thus, it is hereby ORDERED that this case shall be converted to Chapter 7. It is further ORDERED that the legal professionals and the accountants are to disgorge to the Chapter 7 trustee ALL professional fees paid including the amount of $9,212.50 ($1,504.00 in accountant fees and $7,708.50 in legal fees) reported as being paid in the operating reports. It is up to the Chapter 7 trustee to determine whether to pursue the insider for the financial transactions that took place.
NOTES
[1] The Chapter 11 Operating Order is routinely entered in every Chapter 11 case. The order enables the Court and Bankruptcy Administrator to manage and supervise Chapter 11 cases.
[2] Section 101(31)(B)(vi) provides:
"insider" includes (B) if the debtor is a corporation (vi) relative of a general partner, director. officer, or person in control of the debtor.
[3] Not only did the Court not approve employment, the Court is not even aware of the identity of the accountant.
[4] These legal payments may have gone to legal professionals other than counsel that was acting without authority in the bankruptcy case.
[5] This figure represents professional fees paid since the filing of the case and reported in the operating reports.
[6] The case was filed on May 8, 1995.
[7] As of the date of the hearing, November 13, 1996, no plan or disclosure statement has been filed.
[8] 11 U.S.C. § 364(b) provides:
The court, after notice and a hearing, may authorize the trustee to obtain unsecured credit or to incur unsecured debt other than under subsection (a) of this section, allowable under section 503(b)(1) of this title as an administrative expense.
[9] The debtor-in-possession presented no evidence that these credit transactions were in the ordinary course of business.
[10] 11 U.S.C. § 327(a) provides:
(a) Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title.
[11] 11 U.S.C. § 1107(a) provides:
(a) Subject to any limitations on a trustee serving in a case under this Chapter, and to such limitations or conditions as the court prescribes, a debtor in possession shall have all of the rights, other than the right to compensation under section 330 of this title, and powers, and shall perform all the functions and duties, except the duties specified in sections 1106(a)(2), (3), and (4) of this title, of a trustee serving in a case under this Chapter.
[12] Fed.R.Bankr.P. 2014(a). The rule provides in full:
An order approving the employment of attorneys, accountants, appraisers, auctioneers, agents, or other professionals pursuant to § 327, § 1103, or § 1114 of the Code shall be made only on application of the trustee or committee. The application shall be filed and, unless the case is a Chapter 9 municipality case, a copy of the application shall be transmitted by the applicant to the United States trustee. The application shall state the specific facts showing the necessity for the employment, the name of the person to be employed, the reasons for the selection, the professional services to be rendered, any proposed arrangement for compensation, and, to the best of the applicant's knowledge, all of the person's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee. The application shall be accompanied by a verified statement of the person to be employed setting forth the person's connections with the debtor, creditors, or any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee.
[13] The Court, among other things, must insure that the professionals to be employed do not have a conflict of interest and are disinterested as that term is defined under 11 U.S.C. § 101(14).
[14] Fed.R.Bankr.P. 2016(a) provides:
Application for Compensation or Reimbursement. An entity seeking interim or final compensation for services, or reimbursement of necessary expenses, from the estate shall file an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested. An application for compensation shall include a statement as to what payments have theretofore been made or promised to the applicant for services rendered or to be rendered in any capacity whatsoever in connection with the case, the source of the compensation so paid or promised, whether any compensation previously received has been shared and whether an agreement or understanding exists between the applicant and any other entity for the sharing of compensation received or to be received for services rendered in or in connection with the case, and the particulars of any sharing of compensation or agreement or understanding therefor, except that details of any agreement by the applicant for the sharing of compensation as a member or regular associate of a firm of lawyers or accountants shall not be required. The requirements of this subdivision shall apply to an application for compensation for services rendered by an attorney or accountant even though the application is filed by a creditor or other entity. Unless the case is a Chapter 9 municipality case, the applicant shall transmit to the United States trustee a copy of the application.
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982 F. Supp. 867 (1997)
INTER OCEAN FREE ZONE, INC., Plaintiff,
v.
UNITED STATES CUSTOMS SERVICE, Defendant.
No. 97-618-CIV.
United States District Court, S.D. Florida.
October 27, 1997.
*868 Michael Zelman, Coral Gables, FL, for Plaintiff.
Carole M. Fernandez, Asst. U.S. Atty., Office of the U.S. Attorney, Southern District of Florida, Miami, FL, for Defendant.
*869 ORDER GRANTING SUMMARY JUDGMENT
HIGHSMITH, District Judge.
THIS CAUSE came before the Court upon Plaintiff Inter Ocean's Motion for Summary Judgement; and Defendant's Motion for Summary Judgment, both filed August 13, 1997. For the reasons set forth below, summary judgment is granted in favor of the defendant.
PROCEDURAL BACKGROUND
On March 12, 1997, Plaintiff Inter Ocean Free Zone, Inc. ("Inter Ocean") filed its Complaint for Declaratory and Injunctive Relief, seeking production of certain customs forms submitted by non-party Japan Electronics, Inc. ("Japan Electronics"). On April 21, 1997, Defendant United States Customs Service ("Customs") filed and served its answer, asserting that the forms in question are exempt from disclosure. Thereafter, pursuant to this Court's Order, Customs submitted the contested forms for in camera review. Currently, both parties move for summary judgment.
STANDARD OF REVIEW
In deciding a summary judgment motion, a court must apply the standard stated in Fed. R.Civ.P. 56(c):
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
In applying this standard, the Eleventh Circuit has stated that:
The party seeking summary judgment bears the exacting burden of demonstrating that there is no genuine dispute as to any material fact in the case. In assessing whether the movant has met this burden, the courts should view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion. All reasonable doubts about the facts should be resolved in favor of the non-movant.
Clemons v. Dougherty County, Ga., 684 F.2d 1365, 1368-69 (11th Cir.1982) (citations omitted); see also Tisdale v. United States, 62 F.3d 1367, 1370 (11th Cir.1995). Moreover, "the party opposing the motion for summary judgment bears the burden of responding only after the moving party has met its burden of coming forward with proof of the absence of any genuine issues of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986).
The United States Supreme Court has provided significant additional guidance as to the evidentiary standard which trial courts should apply in ruling on a motion for summary judgment:
[The summary judgment] standard mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a), which is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict. Brady v. Southern R.R. Co., 320 U.S. 476, 479-480 [64 S. Ct. 232, 234-235, 88 L. Ed. 239] (1943).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). The Court in Anderson further stated that "[t]he mere existence of a scintilla of evidence in support of the position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant]." Id. at 252, 106 S.Ct. at 2512.
FACTUAL BACKGROUND
In a letter dated January 2, 1997, Inter Ocean made a request, pursuant to the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552, to Customs in Pharr, Texas, for all Customs Forms 1512 that had been submitted by Japan Electronics, from April 1, 1995, to April 30, 1996. August 13, 1997, Affidavit of Sinecio Gutierrez; Declaration of Marvin Amernick, pp. 1-2.
2. The documents Inter Ocean seeks are "entry documents" required to be submitted by importers and/or consignees who import merchandise into the United States. 19 U.S.C. § 1485. They contain information including the identification of the manufacturer and shipper, description of merchandise, including *870 its quantity and value, and other commercial information concerning the importation of goods. Brokers, freight forwarders, consolidators and other agents are identified in the forms.
3. Customs has traditionally regarded these forms as confidential commercial information due to the nature of the information contained in the forms.
4. Customs conducted a search for the requested forms, and located and sorted them into categories. Amernick Decl., ¶ 6. As noted above, these Forms 1512 were provided to this Court for in camera review. This Court has made such review of each form.
a. The first category of records located by the search are those Forms 1512 that identify Japan Electronics as the importer of record. Inter Ocean is not named in any of these forms.
b. The second category of records are those Forms 1512 wherein Japan Electronics is listed as the consignee. Inter Ocean is not named in any of these forms.
c. The third category of records are those Forms 1512 that identify Inter Ocean as the importer of record. In each of the records in this last category, Japan Electronics is listed as the consignee.[1]
5. Japan Electronics was advised of Inter Ocean's request and of the pending action In a June 6, 1997, letter Japan Electronics objected to the disclosure of the Forms 1512, asserting that the information requested was "both commercial financial and competitive sensitive information" and that such disclosure "could likely result in possible competitive harm." Amernick Decl., ¶ 10; Affidavit of Pishu (Richard) Chatlani, p. 2.
6. More specifically, Japan Electronics provided an affidavit to Customs outlining how and why release of the forms would likely result in competitive harm. Among other things, Japan Electronics has asserted, and has filed a separate suit against Inter Ocean alleging, that Inter Ocean conspired to do business directly with Japan Electronics' customers, thereby depriving it of brokerage fees, and that Inter Ocean, through its statements and actions, has caused injury to the Japan Electronics' business reputation and business relationships. Chatlani Aff., pp. 1-2.
7. Based on these objections, Customs determined that the Japan Electronics' Forms 1512 contain commercial and financial information that is "privileged and confidential" in that the release of this information would likely cause substantial competitive harm to Japan Electronics. Amernick Decl., ¶¶ 11, 12, 14; Hence, Customs asserts that the forms are exempt from disclosure under FOIA Section 552(b)(4) ("Exemption Four"). Amernick Decl., ¶ 11.
8. Pursuant to Exemption Four, Customs denied Inter Ocean's request for the Forms 1512 submitted by Japan Electronics.
9. Inter Ocean contends that Japan Electronics is not entitled to the protection afforded by Exemption Four because it is no longer in business.
10. In support of its contention that Japan Electronics is no longer in business, Inter Ocean submitted a private investigator's affidavit, stating that the phone number for Japan Electronics is not in service, its principle place of business is being used by another entity, and the address for its corporate registered agent is a vacant padlocked building. July 11, 1997, Affidavit of Sinecio Gutierrez, pp. 1-2.
11. In response to Inter Ocean's assertion that Japan Electronics is not in business, Customs submitted an affidavit from Japan Electronics' manager, Pishu (Richard) Chatlani ("Chatlani"). He states that although Japan Electronics has had to scale back its operations, it is in business and maintains a current post office box in McAllen, Texas. Chatlani Aff., p. 1. He further asserts that Japan Electronics is an "active corporation, *871 and [] is current on all of it's [sic] corporate franchise taxes." Chatlani Aff., p. 1.
DISCUSSION
The Freedom of Information Act ("FOIA") was enacted to inform the public about "what [its] government is up to." U.S. Dep't of Justice v. Reporters Committee, 489 U.S. 749, 772-75, 109 S. Ct. 1468, 1481-83, 103 L. Ed. 2d 774 (1989). However, FOIA "is not a discovery statute." Johnson v. U.S. Dep't of Justice, 758 F. Supp. 2, 5 (D.D.C.1991), citing Reporters Committee. The identity of the FOIA requester and the requester's reasons for making the request have no bearing upon its entitlement to the information. Reporters Committee, 489 U.S. at 771, 109 S.Ct. at 1480-81. Thus, with limited exception, what is given to one requester is what is available to all who make the same request.[2]
Information is withheld from requesters pursuant to exemptions set forth in FOIA. These exemptions are to be narrowly construed, but were intended by Congress "to have meaningful reach and application." John Doe Agency v. John Doe Corp., 493 U.S. 146, 152, 110 S. Ct. 471, 475, 107 L. Ed. 2d 462 (1989). In enacting the exemptions, Congress intended to preserve confidentiality in certain necessary situations. See, FAA v. Robertson, 422 U.S. 255, 262, 95 S. Ct. 2140, 2146, 45 L. Ed. 2d 164 (1975); accord, FBI v. Abramson, 456 U.S. 615, 631-32, 102 S. Ct. 2054, 2064-65, 72 L. Ed. 2d 376 (1982); Church of Scientology v. United States Dep't of Justice, 612 F.2d 417, 426 (9th Cir.1979).
A. Burden of Proof
In FOIA litigation the government has the burden of proving that an exemption was properly invoked in its decision to withhold information. Ely v. FBI, 781 F.2d 1487, 1489-90 (11th Cir.1986). That burden is met where the agency demonstrates that it has logically applied FOIA exemptions and where there is not contradictory evidence in the record or evidence of agency bad faith. See Hayden v. NSA/CSS, 608 F.2d 1381, 1387 (D.C.Cir.1979); Hemenway v. Hughes, 601 F. Supp. 1002, 1004 (D.D.C.1985); see also Halperin v. CIA, 629 F.2d 144, 148 (D.C.Cir.1980); Military Audit Project v. Casey, 656 F.2d 724, 738 (D.C.Cir.1981)
B. Exemption Four
Exemption Four, 5 U.S.C. § 552(b)(4), the exemption at issue here, protects from disclosure (1) "trade secrets" and "commercial or financial information"; (2) that is obtained from a person; and (3) is "privileged or confidential." See, Hustead v. Norwood, 529 F. Supp. 323, 326 (S.D.Fla.1981). In the instant case, there is no dispute that the requested Forms 1512 contain "commercial or financial information." In addition, there is no dispute that Japan Electronics is a "person" within the meaning of 5 U.S.C. § 551(2) (defining "person" to include "an individual, partnership, corporation, association, or public or private organization other than an agency"). Therefore the issue that remains to be resolved by this Court is whether the information sought by Inter Ocean is "privileged or confidential."
There is a two-part test to determine whether information is "privileged or confidential" for the purposes of Exemption Four. See Continental Oil Co. v. FPC, 519 F.2d 31, 35 (5th Cir.1975); Continental Stock Transfer & Trust Co. v. SEC, 566 F.2d 373, 375 (2d Cir.1977); National Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C.Cir. 1974). Under this test, in order to be deemed "confidential" the information sought must have the effect of either (1) impairing the government's ability to obtain necessary information in the future, or (2) "causing substantial harm to the competitive position of the person from whom the information was obtained." Continental Stock, 566 F.2d at 375. As there is no dispute that the first prong of this test does not apply to the instant action,[3] this Court addresses only the second prong.
*872 In order to withhold information under the competitive harm prong of this test, Customs must show that there is (1) actual competition and (2) a likelihood of substantial competitive harm. See Worthington Compressors, Inc. v. Costle, 662 F.2d 45, 51 (D.C.Cir.1981). With regard to the second of these elements, the likelihood of substantial competitive harm:
[n]o actual adverse effect on competition need be shown, nor could it be, for the requested documents have not been released. The court need only exercise its judgment in view of the nature of the material sought and competitive circumstances in which the [submitter does] business.
National Parks & Conservation Ass'n v. Kleppe, 547 F.2d 673, 675 (D.C.Cir.1976); accord Miami Herald Pub. Co. v. United States SBA, 670 F.2d 610, 614 (5th Cir. Unit B 1982).
As noted above, Inter Ocean contends that Japan electronics is not "in business" and, therefore, is not in actual competition and risks no likelihood of any competitive harm. In support of this assertion, Inter Ocean submitted an affidavit from a private investigator. As noted above, the private investigator states that Japan Electronics' phone number is not in service; its principle place of business is being used by another entity; and the address for its corporate registered agent is a vacant padlocked building. From these bare, albeit undisputed, facts Inter Ocean concludes that Japan Electronics (1) is no longer in business and (2) cannot suffer competitive harm.
The Court, however, notes that these facts alone are insufficient to raise a question of material fact as to the issue of whether Japan Electronics is in actual competition and would likely suffer substantial competitive harm if the requested information were released. Japan Electronics' admittedly weakened financial position does not amount to a complete inability to suffer competitive harm. See e.g. Nadler v. Federal Deposit Ins. Corp., 899 F. Supp. 158, 164 (S.D.N.Y. 1995) (determining that a company in receivership was entitled to the protection of Exemption Four). One purpose underlying Exemption Four is the protection of the rights of those who are obliged to provide information to the government. National Parks, 498 F.2d at 769. A struggling, perhaps even failing, business remains entitled to the protections that Exemption Four affords to any company.
The information withheld in this case is similar to that withheld in Timken Co. v. U.S. Customs Service, 491 F. Supp. 557 (D.D.C.1980) and Timken Co. v. U.S. Customs Service, 531 F. Supp. 194 (D.D.C.1981). In those cases the court upheld the withholding, under Exemption Four, of Customs documents related to valuation of imported merchandise and assessment of customs duties. The court determined that disclosure of information such as the value determinations by Customs of imported goods, invoice unit prices and total invoice prices, quantities sold at home and for export, and calculated customs duty amounts would likely result in substantial competitive harm. Also, the court recognized that disclosure of confidential arrangements with customers is likely to give rise to objections from customers and disruption of customer relationships.
Those same considerations apply in the instant action. Moreover, as outlined above, in the instant case, Japan Electronics claims that Inter Ocean has conspired to do business directly with Japan Electronics' customers, thereby depriving it of brokerage fees.[4] Therefore, for this reason and the reasons outlined above, this court finds that the Forms 1512 that are responsive to Inter Ocean's FOIA request, were properly withheld under Exemption Four.
CONCLUSION
The Forms 1512 withheld in this case contain information compelled to be submitted to the government that qualifies as confidential under the competitive harm standard established *873 by National Parks and subsequent decisions. Based on the objections stated by Japan Electronics and the nature of the information contained in the forms, and in consideration of the cases cited above, Customs had a reasonable basis for concluding that the Forms 1512, which fall within the first and second categories described above, are exempt from disclosure under Exemption Four.[5] Accordingly, this Court finds that Customs has logically, properly, and in good faith applied Exemption Four to withhold production of the requested records. Therefore, for the foregoing reasons, it is hereby
ORDERED AND ADJUDGED that Defendant's Motion for Summary Judgment, filed August 13, 1997, is GRANTED. It is further
ORDERED AND ADJUDGED that, pursuant to Rule 58 of the Federal Rules of Civil Procedure, Summary Final Judgment shall be entered by a separate order.
NOTES
[1] The Court notes that the Forms 1512 in the third category were submitted to Customs by Inter Ocean and not Japan Electronics. Hence, they are not responsive to the instant FOIA request. Therefore, the third category of documents located by Customs' search and submitted to this Court for in camera review shall not be released to Inter Ocean pursuant to the instant FOIA request.
[2] The exception is where the objection to disclosure is based on a claim of privilege and the requester is the party protected by the privilege. Reporters Committee, 489 U.S. at 771, 109 S.Ct. at 1480-81.
[3] Moreover, there can be no reasonable concern that those who are required by statute to submit Forms 1512 will risk violating the law, thereby impairing the government's ability to obtain necessary information. See e.g. Worthington Compressors, Inc. v. Costle, 662 F.2d 45, 51 (D.C.Cir. 1981).
[4] The accuracy of this allegation is the subject matter of a cause of action pending before another court. Accordingly, this Court makes no findings as to the truth or falsity of that allegation.
[5] This Court determined that the documents in category three were not responsive to Inter Ocean's FOIA request.
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IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-92-368-CR
J. PRUDENCIO RODRIGUEZ-IZQUIERDO,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF BELL COUNTY, 27TH JUDICIAL DISTRICT
NO. 41,270, HONORABLE JACK W. PRESCOTT, JUDGE
PER CURIAM
This is an appeal from a conviction for attempted murder. Punishment was
assessed at confinement for 5 years.
Appellant has filed a motion to dismiss the appeal. No decision of this Court has
been delivered. The motion is granted and the appeal is dismissed. See Tex. R. App. P. Ann.
59(b) (Pamph. 1992).
[Before Chief Justice Carroll, Justices Jones and Kidd]
Dismissed On Appellant's Motion
Filed: October 7, 1992
[Do Not Publish]
October 7, 1992
Mr. Stephen E. Blythe
Tarver, Bachus & Blythe
P. O. Box 2088
Temple, Texas 76501
Honorable James T. Russell
Administrative Assistant
Bell County Courthouse
P. O. Box 540
Belton, Texas 76513
Re: No. 3-92-368-CR--J. Prudencio Rodriguez-Izquierdo v. The State of Texas
(t/c no. 41,270)
Counsel:
In accordance with Rule 91, Texas Rules of Appellate Procedure, enclosed is a copy of the
opinion and judgment handed down by this Court on this date in the above cause.
The Court's mandate has been issued this date to the clerk of the trial court under separate cover.
Very truly yours,
W. KENNETH LAW, CLERK
By
Barbara E. Chapman, Deputy
Enclosures
xc: State Prosecuting Attorney
Clerk, Court of Criminal Appeals
Honorable Jack W. Prescott, District Judge
Mrs. Daffy Carpenter, District Clerk
TRIAL COURT NO. 41,270
THE STATE OF TEXAS.
TO THE 27TH DISTRICT COURT of BELL COUNTY - GREETINGS:
Before our COURT OF APPEALS, on the 7th of October A.D. 1992, the cause upon appeal to
revise or reverse your Judgment between
J. PRUDENCIO RODRIGUEZ-IZQUIERDO, Appellant,
No. 3-92-368-CR vs.
THE STATE OF TEXAS, Appellee,
was determined; and therein our said COURT OF APPEALS made its orders in these words:
THIS CAUSE came on to be heard on the written motion of the appellant to dismiss the appeal and the
same being considered, because it is the opinion of this Court that the same should be granted: it is
ORDERED, ADJUDGED and DECREED by the Court that appellant be allowed to withdraw notice of
appeal and that the appeal be dismissed; that the appellant pay all costs in this behalf expended; and that
this decision be certified below for observance.
WHEREFORE, We command you to observe the order of said COURT OF APPEALS in this
behalf and in all things have it duly recognized, obeyed and executed.
WITNESS the HONORABLE JIMMY CARROLL, Chief Justice
of our said COURT OF APPEALS for the Third District of Texas,
with the seal thereof annexed, at the City of Austin, this the 7th day
of October A.D. 1992.
W. KENNETH LAW, CLERK
by: , Deputy
Barbara E. Chapman
October 7, 1992
Mrs. Daffy Carpenter
District Clerk
Bell County Courthouse
104 S. Main
Belton, Texas 76513
Re: No. 3-92-368-CR--J. Prudencio Rodriguez-
Izquierdo v. State of Texas
(t/c no. 41,270)
Dear Mrs. Carpenter:
Enclosed, with reference to the above cause, is the mandate of this Court. Please acknowledge
your receipt of same by returning the enclosed card (No. 1) to this office, appropriately
completed.
Rule 87(b), Texas Rules of Appellate Procedure, sets out the procedures to be followed upon your
receipt of the mandate.
Upon execution of the mandate in accordance with the rule, either your office or the sheriff's
office should return the remaining card enclosed (No. 2), appropriately completed.
Your cooperation in this regard is appreciated.
Very truly yours,
W. KENNETH LAW, CLERK
by
Barbara E. Chapman, Deputy
Enclosures to Clerk
xc: Mr. Stephen E. Blythe
Honorable James T. Russell
MR. STEPHEN E. BLYTHE
TARVER, BACHUS & BLYTHE
P. O. BOX 2088
TEMPLE TX 76501
HONORABLE JAMES T. RUSSELL
ADMINISTRATIVE ASSISTANT
BELL COUNTY COURTHOUSE
P. O. BOX 540
BELTON TX 76513
MRS. DAFFY CARPENTER
DISTRICT CLERK
BELL COUNTY COURTHOUSE
104 S. MAIN
BELTON TX 76513
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409 Pa. Super. 10 (1991)
597 A.2d 636
Georg M. KATZENBERGER, Appellant,
v.
Hannelore M. KATZENBERGER, Appellee.
Superior Court of Pennsylvania.
Argued March 19, 1991.
Filed September 9, 1991.
Reargument Denied November 4, 1991.
*11 Margaret Joy, Pittsburgh, for appellant.
Hannelore Katzenberger, pro se.
Before ROWLEY, President Judge, and WIEAND and HOFFMAN, JJ.
*12 WIEAND, Judge:
In this divorce appeal, we are again asked to determine what portion of a defined benefit pension plan is to be deemed marital property for purposes of effecting equitable distribution by the deferred distribution method.
Georg and Hannelore Katzenberger were married on December 23, 1963, separated on July 23, 1981 and divorced on December 20, 1984. The court retained jurisdiction over the parties' economic claims, however, and, on November 8, 1985, entered a decree nisi which, inter alia, awarded to wife one-half of husband's pension benefits. Neither party filed exceptions to the decree, and counsel for the parties thereafter submitted proposed Qualified Domestic Relations Orders consistent with the court's decree.
Georg Katzenberger began his employment as a pilot with Mohawk Airlines in 1968. Mohawk subsequently merged with U.S. Air, and Georg has continued his employment with U.S. Air until the present time.[1] The U.S. Air pension is a defined benefit plan and is qualified under the Employment Equity Act of 1984. The amount of a participating employee's pension is determined by multiplying the employee's final average earnings by his or her years of credited service to arrive at an amount which is then multiplied by an appropriate retirement plan factor which is derived by referring to a prepared company schedule. Final average earnings equal the participating employee's highest average earnings for any thirty-six (36) consecutive months out of his or her last one hundred twenty (120) months of employment.
Husband-appellant proposed that, although distribution of his pension was to be deferred, the value of his pension benefit should be determined by his final average earnings as of the date of separation, i.e., July 23, 1981. The court, however, entered an order which did not determine the value of pension benefits as of the date of separation but provided that the deferred date for payment was to be *13 elected by the wife at any time after July 1, 1989. Wife's one-half interest therein was to be multiplied by a fraction whose numerator was thirteen (13), the total time during which husband participated in the plan during marriage, and whose denominator was a number representing the number of years and months from husband's first year of service to the date of the commencement of payments to wife. Husband filed exceptions, which were denied, and then appealed. He contends that the use of the deferred distribution method for valuing his pension as of the date on which appellee-wife elects to commence payment will inequitably distribute pension benefits which have accrued after the date of separation and which are not marital property.
We adhere to the rule that the denominator of the coverture fraction is equal to the total period of time the employee-spouse participated in the pension benefit program. See: Lyons v. Lyons, 401 Pa.Super. 271, 280, 585 A.2d 42, 47 (1991); Braderman v. Braderman, 339 Pa.Super. 185, 198, 488 A.2d 613, 619 (1985); King v. King, 332 Pa.Super. 526, 533, 481 A.2d 913, 916 (1984). We recognize that our courts have varied the definition of the denominator as either "the total period the employee participated in the benefits program," Braderman v. Braderman, supra; King v. King, supra, or "the total period of time the employee-spouse was accruing benefits." Lowry v. Lowry, 375 Pa.Super. 382, 404, 544 A.2d 972, 983 (1988). In many instances, there will be no difference between these two figures. Where there is a difference, however, the denominator adopted in Lyons v. Lyons, supra, will produce the more accurate result.
Herein, wife is permitted to begin receiving payments from the pension at any time after July 1, 1989. However, Georg will not have reached age 60, the required retirement age for pilots, until July 1, 1991. There is no indication in the record that Georg intended to retire prior to his sixtieth birthday. The court has set the denominator without regard for the fact that Georg will have to participate in the *14 benefit program another two years to receive his pension benefits.
In Berrington v. Berrington, 409 Pa.Super. 355, 598 A.2d 31 (1991; filed of even date herewith), we determined that only that pension which is available on the date of separation is marital property and that enhanced benefits purchased by employer or employee contributions following separation are not marital property. Our decision was based upon the express language of Section 401(e) of the Divorce Code of April 2, 1980, P.L. 63, No. 26, 23 P.S. § 401(e).[2] The decision held that pension benefits available for distribution according to the deferred distribution method must be the same as those available for distribution according to the immediate offset method. Thus, although the non-employee spouse's economic circumstances may be considered by a court in making distribution under Section 401(d) of the Divorce Code, supra,[3] they may not be considered in determining that which constitutes marital property.
For the same reasons, we hold that the order entered in the instant case was erroneous. The pension benefits available for distribution are those which would have been payable if the husband-appellant had retired on the date of separation.
Reversed and remanded for the entry of an order in accordance with the foregoing opinion. Jurisdiction is not retained.
NOTES
[1] Hannelore Katzenberger is employed by Mobay Chemical Company as a bilingual secretary.
[2] This section of the Divorce Code has now been codified at 23 Pa.C.S. § 3501(a).
[3] This section is now codified at 23 Pa.C.S. § 3502(a).
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982 F. Supp. 341 (1997)
James CALLWOOD, Plaintiff,
v.
DEPARTMENT OF PROBATION OF THE VIRGIN ISLANDS, Defendant.
Civil No. 1996-38.
District Court, Virgin Islands, Appellate Division, D. St. Thomas and St. John.
October 31, 1997.
*342 James Callwood, Lewisburg, PA, Pro Se.
James S. Carroll, III, Office of U.S. Atty., St. Thomas VI, for Defendant.
MEMORANDUM
MOORE, Chief Judge.
This matter is before the Court on defendant's motion to dismiss and the plaintiff's motion for summary judgment. For the reasons expressed herein, defendant's motion to dismiss will be granted, and the case closed.
I. FACTS
Plaintiff is a prisoner serving a sentence pursuant to a conviction in the Virgin Islands for murder in the second degree.[1] At the time of his conviction, the District Court of the Virgin Islands had jurisdiction over all felony prosecutions under Virgin Islands law, including murder. His pre-sentence report was performed by the Department of Probation of the Virgin Islands located at the District Court of the Virgin Islands. On or about January 6, 1996, plaintiff made a request pursuant to the Federal Privacy Act, 5 U.S.C. § 552a, in which he sought to have his pre-sentence report ["PSR"] amended. Chief Probation Officer Lionel Todman, who has subsequently retired, responded that the Department of Probation had no authority to amend the PSR. Plaintiff next filed suit in this Court on February 6, 1996 seeking an order of the Court to amend the PSR. Specifically, plaintiff asserts that: (1)certain burglaries should not be attributed to him; (2) his juvenile record should not be mentioned; (3) the Department of Probation erred in stating that his education terminated in 1971, since he was only five years old at the time; and (4) that the PSR should not state that plaintiff suffers from social, economic, and parental deprivation. Plaintiff seeks an amendment to remove these inaccuracies from his PSR and an injunction preventing mention of his juvenile record.
Plaintiff filed a motion for summary judgment on February 19, 1997. Defendant filed a motion to dismiss on March 14, 1997. Both of these motions revolve around the same issue, namely the applicability of the Federal Privacy Act to this case. The Court will address both motions in a unified discussion.
II. DISCUSSION
Section 552a(e)(5) provides that each agency maintaining a system of records shall
maintain all records which are used by the agency in making any determination about any individual with such accuracy, relevance, timeliness, and completeness as is reasonably necessary to assure fairness to the individual in the determination.
Pursuant to § 552a(g)(1)(C), the District Court is provided with jurisdiction over lawsuits brought against an agency which "fails to maintain any record concerning an individual with ... accuracy, relevance, timeliness and completeness" that causes a determination to be made which is "adverse to the individual." Sections 552a(d)(2) and (3) establish, in accordance with § 552a(g)(1)(A), a cause of action and vest jurisdiction in the District Court for lawsuits reviewing the refusal or failure of an agency to amend a record in accordance with a request from an individual. Section 552a(g)(4) provides for damages when an agency acts willfully or intentionally in failing to maintain accurate records or when an agency refuses to amend *343 a record in such a way as to have an adverse effect on an individual.
At first glance, it might appear that plaintiff has adequately alleged a cause of action under the Privacy Act. Under the definitions of the Privacy Act, however, the Department of Probation is not considered an "agency." Section 551(1)(B) specifically excludes the courts of the United States from the definition of "agency." In fact, the definition excludes the entire judicial branch of the federal government from the provisions of the Privacy Act.[2] Since the Office of Probation is an administrative unit of this Court, it is not subject to the terms of the Privacy Act.
According to the terms of his complaint, plaintiff asserts the Privacy Act as the only source of this Court's jurisdiction over his claim. Since the subject matter of plaintiff's claim does not fall within the protection of the Privacy Act, that act cannot be a source for the Court's jurisdiction of this case. Not only does this Court lack subject matter jurisdiction, but plaintiff fails to state a claim upon which relief may be granted. Therefore, plaintiff's motion for summary judgment will be denied. Defendant's motion to dismiss will be granted, and this case will be closed.
NOTES
[1] At the time of his conviction, the District Court of the Virgin Islands had jurisdiction over felony prosecutions, and his pre-sentence report was performed by the Department of Probation of the Virgin Islands located at the District Court of the Virgin Islands. Although the District Court of the Virgin Islands no longer maintains jurisdiction over all felony prosecutions, the Court retains jurisdiction over inmates sentenced while it possessed such jurisdiction.
[2] See, e.g., Dorman v. Higgins, 821 F.2d 133, 137 (2d Cir.1987); Lifetime Communities, Inc. v. Administrative Office of the U.S. Courts, 690 F.2d 35, 38 (2d Cir.1982); Pangburn v. Culbertson, No. 97-CV-0367E(H), 1997 WL 276180 (W.D.N.Y. May 21, 1997); Schwartz v. United States Dep't of Justice, No. 94 CIV. 7476(AGS), 1995 WL 675462 (S.D.N.Y. Nov.14, 1995); Chambers v. Division of Probation, Civ. A. No. 87-0163, 1987 WL 10133 (D.D.C. Apr.8, 1987); Kimberlin v. United States Dep't of Justice, 605 F. Supp. 79, 81-82 (N.D.Ill.1985), aff'd, 788 F.2d 434 (7th Cir.1986).
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306 S.W.2d 604 (1957)
Eugene C. THUMM (Plaintiff), Appellant,
v.
Curtis L. LOHR (Defendant), Respondent.
No. 29759.
St. Louis Court of Appeals. Missouri.
November 5, 1957.
Rehearing Denied December 2, 1957.
*606 John A. Mathewson, Cook, Fairfield, Howard & Murphy, St. Louis, for appellant.
Arnold J. Willmann, Chaim H. Zimbalist, Clayton, for respondent.
MATTHES, Judge.
On September 25, 1954, defendant Curtis L. Lohr drew his check on the City National Bank & Trust Co. of Kansas City, Mo., payable to Harry Herring Co., a real estate broker, for $1,200. The payee endorsed the check to the order of Eugene C. Thumm, plaintiff-appellant herein. Thereafter, when payment of the check was stopped by defendant, plaintiff brought this action seeking to recover the amount thereof. Trial of the issues to the court, a jury having been waived, resulted in a judgment in favor of the defendant. In time plaintiff prosecuted his appeal to this court.
At the threshold of the case we are confronted with a motion to dismiss the appeal for the reason that the points relied on as contained in appellant's brief are insufficient to meet the requirements of Supreme Court rule 1.08, 42 V.A.M.S. This motion was filed on October 3, 1957. On the following day appellant deposited a supplemental brief in the Office of the Clerk of this Court with a motion requesting leave to file the same. Examination of appellant's original brief discloses that two of the points relied on, while not wholly inadequate, are nevertheless subject to criticism because they fail to specify and designate wherein and in what respect the court committed error. The supplemental or amended brief supplies these deficiencies. While the supplemental brief was not delivered to or served on respondent 45 days before the day on which the cause was set for hearing, as required by rule 1.09, we do not understand that respondent makes any contention in this respect. His position is, that absent a request to suspend the rules, there is no authority for the filing of the supplemental brief. While appellant's motion does not directly and expressly call for a suspension of the rules as authorized by rule 1.15, we construe said motion as an attempt in good faith to pray for that relief and have concluded that the interests of justice require the filing of the supplemental brief. This action will not prejudice respondent for it appears on October 4 the latter filed his brief in which he responded to and met the points advanced by appellant in both his original and supplemental briefs. Therefore, respondent's motion to dismiss is overruled; appellant's supplemental brief is ordered filed and respondent's motion to strike the supplemental brief is overruled.
The check upon which the suit was brought had its origin in these facts: In 1954 plaintiff was engaged in the business of building and selling homes in a subdivision in St. Louis County, Missouri. A contract for the sale of a lot and dwelling in plaintiff's subdivision, dated September 25, 1954, was entered into between plaintiff as seller *607 and defendant and his wife, Jacqueline A. Lohr, as purchasers. By the terms thereof the purchasers agreed to pay $24,000 for the property and on the day the contract was prepared Mr. Lohr issued his check, which is the subject of this action, as an earnest payment. It was further provided that the purchasers would forfeit the earnest deposit if the sale was not consummated through fault of purchasers. On September 28, 1954, the contract was approved by plaintiff and on the same day the Harry Herring Co. endorsed and delivered the check to plaintiff. According to the testimony of defendant, a day or two after the contract was executed he informed Mr. Thumm in a telephone conversation that he (defendant) and his wife had "decided we didn't like that particular house. I told him we still wanted to live in that same general area. I asked him if he would allow us to be released from the contract for that particular house. He said `Yes.'"
"Q. Did you have any conversation with him about stopping payment on this check? A. I told him it would be necessary for me to stop payment on the check.
"Q. And you did do that ? A. I did do that.
"Q. Now, did you make arrangements with him at that time, or did you have any conversation with him in respect to coming back to go out to the same subdivision and looking at another house? A. I told him that we would be willing to come back and look at another house and lot in that location.
"Q. What did he say about you buying a house out there, you and your wife, if you recall ? A. Well, he said he had developed the area, or done quite a lot of building in that area, and he was quite happy to have young people living out there, and he hoped he would be able to find us another location if this one was not suitable.
"Q. And you say you had asked him to cancel this contract, is that correct? A. I asked him specifically about that particular contract which we left him; and I wrote him a letter confirming our conversation.
"Q. To the best of your recollection what was his answer to the request to cancel? A. His answer was emphatic. I would never have put it in the letter if he hadn't said that."
Pursuant to the conversation, defendant did immediately stop payment of the $1,200 check. Then, according to his testimony which was fully verified by plaintiff's witness, Mr. Herring, defendant, his wife, their three children, and Mr. Herring went back to plaintiff's subdivision during the week of October 8, 1954, and there met Mr. Thumm. Defendant testified that: "We looked at various locations. We agreed on one particular lot, which was unimproved. And Mr. Thumm said that he would build a house on there for a specific amount of money; and showed us the boundary lines of the lot; and talked to us about the drainage problems, and shrubbery, and things of that sort. And we tentatively agreed at that time on a price for a house to be erected on this lot."
"Q. What was the price? A. $28,000.00.
"Q. Was that the conversation you had in the subdivision with Mr. Thumm and Mr. Herring? A. Yes, sir."
Defendant stated that at no time during his last visit to the subdivision and while negotiations were carried on for the purchase of the $28,000 property did Mr. Thumm make any reference to the contract of September 25 or make demand for the amount of the check, payment of which had been stopped. Following the foregoing conference, defendant returned to his home in Kansas City, Missouri, where he was then residing. Within a day or two thereafter he received a contract for the new location which specified that the price for the property which had been selected was $28,000. In this connection it should be pointed out that Mr. Herring testified that on the 15th of October and subsequent to defendant's last visit to the subdivision, he *608 prepared and sent a copy of the new contract to the defendant along with a letter containing instructions with reference to the execution thereof.
The issues raised by defendant's answer litigated in the lower court, and here pursued by the defendant are rescission and abandonment of the contract and all rights thereunder; and that the contract was invalid from its inception because there was no consideration therefor. With respect to the latter defense it is contended that because title to the lot described in the contract was held by plaintiff and his wife as tenants by the entirety, plaintiff alone could not legally contract to sell the property.
The first contention of error presented by plaintiff is that the court improperly admitted the letter written by the defendant to plaintiff on October 5, 1954. Therein defendant stated, inter alia, "This is to confirm our telephone conversation of Sunday, in which you stated that it would be agreeable to you to release us from our present earnest money contract for the property located at 10 Thorncliff Lane, Kirkwood, Missouri. We will be willing to sign a new contract for a house to be built at a different location, but in the same general neighborhood."
Plaintiff insists that this letter was selfserving in nature and consequently inadmissible.
Of course the rule is firmly entrenched that declarations made by a party in his own interest are ordinarily selfserving and inadmissible. Weller v. Weaver, 231 Mo.App. 400, 100 S.W.2d 594; Keeshan v. Embassy Investment Company, Mo.App., 303 S.W.2d 666. But in this jury waived case, it is our duty with deference to the opportunity of the trial court to judge of the credibility of the witnesses to "review the case upon both the law and the evidence as in suits of an equitable nature," V.A.M.S. § 510.310, subd. 4. Rejected testimony, if in the record and admissible, will be considered upon review, and by the same token, incompetent evidence admitted or considered by the trial court will be disregarded by us. Minor v. Lillard, Mo.Sup., 289 S.W.2d 1, loc. cit. 2, and cases there cited. So plaintiff's first point may be put to rest by a disregard on our part of the claimed self-serving declaration, for as we shall hereafter demonstrate other evidence in the record constitutes ample proof to support the decision denying plaintiff relief.
We do not understand that plaintiff seriously questions that the parties had the right by mutual agreement to lawfully rescind, abrogate or terminate the contract. This is a well-settled rule of jurisprudence. Rogers v. Fremder, Mo.Sup., 261 S.W. 105; Stoedter v. Turner, Mo.App., 237 S.W. 141; Sheetz v. Price, 154 Mo.App., 574, 136 S.W. 733; Conroy Piano Co. v. Pesch, Mo.App., 279 S.W. 226; Facendini v. Hillman, Mo. App., 298 S.W. 1073, 1074; 17 C.J.S. Contracts § 413, p. 899; 12 Am.Jur. Contracts, § 431, p. 1011. But plaintiff does challenge the sufficiency of the evidence to establish that there was in fact a mutual agreement to rescind the original contract of sale. Our attention is directed to the testimony of plaintiff which presents a conflict with defendant's version of the telephone conversation following execution of the written contract. Although plaintiff conceded the conversation took place, he insisted that defendant merely requested plaintiff to forego depositing the check for a few days in order that a transfer of defendant's bank account could be effected, and he emphatically denied that there was any discussion with reference to cancelling or terminating the contract. Thus it will be seen that the record presents two versions of what transpired subsequent to the time the sales contract came into existence. The testimony of defendant, set out supra, if true, afforded substantial proof that there was a mutual understanding of rescission. The trial judge, occupying a more advantageous position with respect to judging of the credibility of plaintiff and defendant, accepted the latter's testimony, and we perceive of no reason why the due *609 deference rule should not be followed. It appears from the memorandum opinion filed by the trial judge that he was pursuaded to conclude the parties had rescinded their contract because of the events which transpired subsequent to the time defendant stopped payment of the check. The impact of these occurrences on the vital issue of rescission is of such force that little doubt can exist on the question. For plaintiff and defendant, as reasonable, prudent persons, would hardly enter into negotiations looking to the purchase by defendant of another home in the same subdivision for $28,000 unless both parties were fully aware of and recognized that the original contract was no longer in existence.
Plaintiff also makes the point that any agreement to rescind was ineffective because there was no consideration to support it. The consideration required to bring about a rescission of the contract is influenced by the document itself and performance or nonperformance thereunder. The rule prevails that if the contract was wholly executory, the mutual agreement of the parties was sufficient to set it aside without consideration. Stoedter v. Turner, Mo. App., 237 S.W. 141, 144; Jose v. Aufderheide, 222 Mo.App. 524, 293 S.W. 476, 478; Facendini v. Hillman, Mo.App., 298 S.W. 1073, 1074; Deu Friend v. McDermott, Mo. App., 251 S.W.2d 339, 342. The same authorities hold that the surrender of a valuable right under a contract is ineffectual unless supported by a valuable consideration. As to plaintiff it is clear that the contract was executory, for while numerous obligations were imposed upon him, the undisputed fact is there had been no performance on his part. See 17 C.J.S. Contracts § 7, pp. 325, 326; Rockhill Tennis Club of Kansas City v. Volker, 331 Mo. 947, 56 S.W.2d 9, 17. Defendant's position was slightly different, in that he had issued his check for an amount equal to five per cent of the contract price. So as to him the contract was not wholly executory. Deu Friend v. McDermott, supra. Nevertheless, the evidence affords proof that there was a sufficient consideration to support the agreement to rescind. Plaintiff was released and discharged from all obligations imposed on him, which included finishing and decorating the interior of the house; furnishing shutters for front windows, and screens and venetian blinds for all windows; and sodding and grading entire lot. Moreover, in relinquishing his rights under the original contract plaintiff was presented with, and acted on, the opportunity to sell defendant another house and lot for an amount which exceeded by $4,000 the consideration plaintiff would have been paid if the rescission had not been effected. It is made to appear that not only were the negotiations for the $28,000 property entered into, but plaintiff's real estate broker prepared and forwarded to defendant a new contract with instructions relative to executing the same. It was only when these negotiations, for some reason not apparent in the record, fell through, that plaintiff assumed the position that there had been no valid rescission of the original contract.
Under the circumstances, we conclude and hold that the sales contract was legally rescinded and terminated, cf. Facendini v. Hillman, supra; Deu Friend v. McDermott, supra; Furrer v. Haupt, 329 Mo. 1087, 49 S.W.2d 53, loc. cit. 57, and that the contract and all rights thereunder were wholly abandoned. Peoples Finance Corporation v. Buckner, 344 Mo. 347, 126 S.W.2d 301; Alropa Corporation v. Smith, 240 Mo.App. 376, 199 S.W.2d 866, loc. cit. 871; 17 C.J. S. Contracts § 412, p. 899.
In view of the foregoing conclusions it is unnecessary to consider whether the original contract was invalid from its inception because plaintiff's wife failed to join in the execution thereof.
The judgment is affirmed.
RUDDY, P. J., and ANDERSON, J., concur.
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306 S.W.2d 541 (1957)
J. Robert MINOR, Administrator With Will Annexed of the Estate of Nellie Prentice, Deceased, Respondent,
v.
Elizabeth D. LILLARD, Administratrix of the Estate of Nellie Ellison, Deceased, Appellant.
No. 45794.
Supreme Court of Missouri. Division No. 2.
November 12, 1957.
*542 Henderson & Boulware, Shelbina, and Earl L. Veatch, Monticello, for appellant.
Bollow, Crist & Oswald, Shelbina, and J. Andy Zenge, Jr., Canton, for respondent.
STOCKARD, Commissioner.
Mrs. Nellie Prentice, now represented by her administrator, filed a demand in the Probate Court of Lewis County against the estate of Miss Nellie Ellison in the amount of $7,157.60 for services rendered to Miss Ellison during her lifetime. The Probate Court allowed the demand for the full amount, and upon appeal the Circuit Court of Shelby County, upon change of *543 venue and after trial without a jury, also allowed the demand in the full amount. An appeal to this court resulted in the judgment being reversed and the cause remanded. Minor v. Lillard, Mo.Sup., 289 S.W.2d 1.
About three weeks before the second trial the parties stipulated that, subject to objections previously raised, either party could use in the second trial the transcript of the testimony taken in the first trial in lieu of calling the witnesses. On June 5, 1956, when the case was called for trial, respondent was permitted, over the objection of appellant, to amend by interlineation parts of the demand so that with the interlineations those parts read as follows:
"For services rendered Nellie Ellison for
sixty-nine (69) months at One Hundred
Twenty Dollars ($75.00) $8,280.00," and
"The fair and reasonable value for seven and two-thirds
months (7 2/3) at Three Hundred Seventy-two $2,852.00
The total of the demand, which included some other items not changed by the amendment, was then amended to read $11,189.60 instead of $7,157.60.
The second trial was before a jury which returned a verdict in the amount of $10,000. The trial court entered judgment for that amount, and incorporated therein the provision that respondent should recover interest at the rate of 6% on $7,157.60 from May 17, 1954, the date of the original allowance of the demand by the probate court and interest at the rate of 6% on the sum of $10,000 from June 6, 1956, the date of the judgment. It is from this judgment that this appeal is taken.
The first two points relied on by appellant are that the trial court erred in permitting the amendment to the demand, and that after permitting the amendment, it erred in denying her request for a continuance.
Prior to January 1, 1956, all demands against the estate of a deceased person had to be exhibited and presented as provided by Sections 464.030 and 464.040 (now repealed) (all statutory references are to RSMo 1949, V.A.M.S.) within one year, with certain exceptions not here applicable, or "be forever barred." Section 464.020 (now repealed). The demand was to be exhibited by serving a notice on the administrator in writing stating "the amount and nature" of the claim. Section 464.030 (now repealed). It is now provided that claims and notice of actions against an estate shall be filed in the probate court within nine months after the first published notice of letters testamentary or of administration, or they shall be forever barred against the estate. Section 473.360.
We have found no Missouri case expressly ruling the question whether a demand or claim against the estate of a decedent can be amended after the expiration of the nonclaim statute so as to increase the amount thereof. However, it has been held that when the demand as originally filed is not so wholly insufficient as to constitute a nullity it is subject to being amended after the nonclaim statute has run. Siegel v. Ellis, Mo.Sup., 288 S.W.2d 932. Such amendments have been allowed when the effect is to make the same demand more specific (Watkins v. Donnelly, 88 Mo. 322; Corson v. Waller, 104 Mo.App. 621, 78 S.W. 656), to correct the affidavit (Dawson v. Wombles, 104 Mo.App. 272, 78 S.W. 823), to show the real consideration for the alleged obligation (Station v. Edman, Mo.App., 28 S.W.2d 425), to show the demand to be against the same person as executrix instead of administratrix (Gewe v. Hanszen, 85 Mo.App. 136), or when the amendment does not change the cause of action (Hunt v. Bouton, 63 Mo. 187; Goddard v. Williamson's Administrator, 72 Mo. 131; Watkins v. Donnelly, 88 Mo. 322; Corson v. Waller, 104 Mo.App. 621, 78 S.W. 656; 2 Limbaugh, Missouri Practice, Probate Courts, § 772). In these cases the test in determining if the amendment could be made has usually been the same as that applied in determining whether an amendment *544 can be made to pleadings after the expiration of the general statute of limitations. However, in each case when the amendment was allowed it did not result in an increase in the amount of the demand.
It has always been recognized that there is a distinction between the purpose of the general statutes of limitations and the special nonclaim statutes applicable to the administration of the estates of decedents. 34 C.J.S. Executors and Administrators § 405, p. 180. One of the purposes of the nonclaim statutes is to provide a method whereby at the termination of a reasonable period the real and personal property not needed to meet the obligations of the estate will be free for distribution to the rightful owners without waiting until every claim has been finally adjudicated, which could take several years as it has in this case.
The history of legislation pertaining to the administration of estates of deceased persons in this state indicates an intent to provide a system whereby real and personal property will not be tied up for an extended period of time, and whereby creditors can obtain payment of their claims without undue delay. The amendments from time to time have been directed to shortening the time for administration and to facilitating the payment of claims and the distribution of the property. Prior to 1866 three years was allowed for the presentment of claims. RSMo 1855, § 2. Subsequent to that time the period was two years until 1911 when the time was shortened to one year. 2 Limbaugh, Missouri Practice, Probate Courts, § 760. It is now nine months. Section 473.360.
The previous probate code had and the present probate code has provisions which are inconsistent with the idea that a claim against an estate can be increased in amount after the expiration of the nonclaim statute. We shall for the sake of brevity refer only to provisions of the present code. The executor or administrator is entitled to make partial distribution "if it appears that there is sufficient money to pay all claims against the estate." Section 473.613. Although security may be required for the return of the property so distributed, it would be impossible for it ever to appear that there is sufficient money in the estate to pay all claims if the claimants could amend after the expiration of the nonclaim statute so as to increase the amount of the claims. The executor or administrator may also deliver to any distributee possession of any specific real estate or personal property to which he is entitled under the terms of a will or by intestacy "if other distributees and claimants are not prejudiced thereby." Section 473.613. Again, while security for the return of the property may be required, it could never be determined that the interests of claimants would not be prejudiced if after the expiration of the nonclaim statute the amount of the pending claims could be increased. The probate court is to classify the allowed claims into seven classifications, and any claim filed after six months is to be placed in the seventh class. Sections 473.373 and 473.397. The executor or administrator shall pay those claims, as far as he has assets, in the order in which they are classed. Section 473.430. However, Section 473.433 directs that upon the expiration of six months from the date of the first publication of letters and after the adjudication of all claims of classes one through six, or when it appears that there are sufficient assets to pay all of such claims whether or not theretofore allowed, the executor or administrator shall proceed to pay all claims which have been allowed by final judgment. It is then provided that at the end of nine months, and after the adjudication of all claims, or when it appears that there are sufficient assets to pay all claims whether or not theretofore allowed, the executor or administrator shall proceed to pay all claims which have been allowed by final judgment. Security may be required from the creditor only *545 when payment is made before the expiration of six months. If a claim were subject to amendment after the expiration of the nonclaim statute so as to increase the amount thereof, then the executor or administrator could never determine that there were sufficient assets to pay all claims until each and every claim had been reduced to final judgment. This, of course, would defeat one of the principal objectives of administration which is to provide for the early payment of adjudicated claims when there are sufficient assets.
When we take into consideration the purpose of the administration of the estate of a deceased person, the history of the statutes governing that administration, and the provisions of the probate code for the payment of claims, it is obvious that the Legislature intended that the full amount of the claim should be presented within the time provided by the nonclaim statute.
We have made a careful search of the authorities in other jurisdictions and we find that this is in accord with all the cases we have found which have ruled on this precise point. Winchell v. Sanger, 73 Conn. 399, 47 A. 706, 66 L.R.A. 935; Burns v. Burns, 228 Ala. 61, 152 So. 48; United States Fidelity & Guaranty Co. v. Blanchard, 182 Miss. 179, 181 So. 134; In re Von Nobel's Estate, 239 Wis. 233, 1 N.W.2d 76. In Black v. Walker, 140 Fla. 48, 191 So. 25, and State ex rel. Steinfort v. District Court of Fourth Judicial District in and for Ravalli County, 111 Mont. 216, 107 P.2d 890, amendments to the claim after the expiration of the nonclaim statute were held to be proper because they did not result in a change of the cause of action and because they did not result in an increase in the amount of the claim. In Dubbs v. Haworth, 102 Kan. 603, 171 P. 624, a claim in the amount of $600 was filed against an estate for services rendered. After the expiration of the nonclaim statute the claimant was required to itemize his demand, and in doing so he set out various services which he claimed to be worth $1,087. It was held that he did not have to elect which services he would rely on, and that he could prove any or all that were itemized, but even if he proved all he would be limited in his recovery to $600. See also, Burns v. Burns, 228 Ala. 61, 152 So. 48; Anderson v. Williams, 26 R.I. 64, 58 A. 251; Annotation 76 A.L.R. 1380; and 34 C.J.S. Executors and Administrators § 417(b) (2).
Although the trial court improperly permitted respondent to amend the claim after the expiration of the applicable nonclaim statute, and the jury returned a verdict for an amount greater than that of the original claim, it is not necessary for this reason that the judgment be reversed and the case retried. The situation is similar to that when a jury returns a verdict in excess of the amount prayed for, and in such a situation, when the excess is not so great as to indicate prejudice on the part of the jury, the error may be corrected by way of remittitur. Rush v. Metropolitan Street Railway Company, 157 Mo.App. 504, 137 S.W. 1029; Acy v. Inland Security Company, Mo.App., 287 S.W.2d 347.
At the time the stipulation was entered into whereby appellant agreed that either party could read to the jury the testimony of witnesses taken at the first trial in lieu of the witnesses being present, appellant had no reason to believe that the demand was not to be in the same amount as that in the first trial. It could well be that she was induced to come unprepared to meet this increased demand which she first learned about after the parties appeared in court on the day set for trial. If it were our conclusion that the amendment could have been made, we would not, under the circumstances of this case, treat lightly appellant's contention that the trial court erred in denying her request for a continuance. However, in view of our holding that the error in permitting the amendment may be corrected by remittitur, and the fact that at the second trial only one witness testified in person on behalf of respondent and he did not testify to the value *546 of the services, no prejudicial error resulted in denying the continuance.
Appellant contends the court erred in permitting that part of the testimony of Dr. P. W. Jennings taken at the first trial to be read to the jury, wherein he answered two hypothetical questions pertaining to the value of the services rendered by Mrs. Prentice, because the witness was not properly qualified and because the question assumed facts not in evidence. An objection to the qualification of the doctor to testify concerning the value of the services was made at the first trial, and when the testimony was read to the jury at the second trial the objection was renewed. The qualification of Dr. Jennings to express an opinion on the value of the services was a matter largely in the discretion of the trial court, Baker v. Brown's Estate, 365 Mo. 1159, 294 S.W.2d 22, and the ruling will not be disturbed unless there is a showing of an abuse of discretion. Boring v. Kansas City Life Insurance Company, Mo. Sup., 274 S.W.2d 233. The doctor testified that he had practiced medicine in the community for 43 years and had treated Miss Ellison; that he had assisted in looking after sick persons and had often obtained help for them; and that he was familiar with the care furnished to Miss Ellison by Mrs. Prentice. We cannot say that under these circumstances the court abused its discretion in ruling that Dr. Jennings was qualified to testify concerning the value of the services of Mrs. Prentice.
The transcript does not show that at the first trial an objection was made to the hypothetical questions propounded to Dr. Jennings on the ground that they assumed facts not in evidence. Therefore the parties agreed that the testimony of the doctor could be read to the jury at the second trial subject only to the ruling of the court on the issue of his qualification to testify concerning the value of the services of Mrs. Prentice. In Addition, the objection at this trial was not made until after the doctor had answered one of the questions, and counsel did not point out to the trial court what facts were considered to be improperly assumed by either question. We do not hold that the hypothetical questions improperly assumed facts not in evidence. In fact we think they did not. But if they did, under the circumstances here presented, no prejudicial error resulted.
Appellant contends that the trial court erred in refusing to give instructions A and F at her request. Instruction A was to the effect that a recovery for services rendered by Mrs. Prentice more than five years before the date of the death of Miss Ellison was barred by the statute of limitations. In view of the evidence on the part of respondent at this trial that the services were continuous from December 26, 1945, to the date of the death of Miss Ellison on May 16, 1952, the period covered by the demand, this requested instruction was erroneous, and therefore it was properly refused. See the cases cited and the complete discussion of this question in the opinion on the previous appeal of this case. Minor v. Lillard, Mo., 289 S.W.2d 1, 6-7.
Instruction F provided, in substance, that if the jury found that the services rendered by Mrs. Prentice to Miss Ellison "were not continuous over the entire period of the claim from December 26, 1945, until May 16, 1952" then recovery for any services rendered prior to May 16, 1947, was barred by the five-year statute of limitations. This is not a correct statement of the law. If the jury found that there was a break in the continuity of the services, respondent was still entitled to recover for the services which were continuous even though some of those continuous services were performed prior to May 16, 1947. Minor v. Lillard, supra; Annotation 7 A.L. R.2d 198. This instruction was properly refused.
Appellant's next contention is that the trial court erred in allowing interest at the rate of 6% on $7,157.60 from May 17, 1954, the date the probate court allowed *547 respondent's demand, to June 6, 1956, the date of the judgment from which this appeal is taken. Respondent's position is that he is entitled to interest on the amount allowed by the probate court from the date of the allowance by reason of Section 408.040 RSMo 1949, V.A.M.S., which provides that interest at the rate of 6%, except as otherwise provided in situations not here applicable, shall be allowed on all money due upon any judgment or order of any court from the day of rendering the same until satisfaction be made by payment. Respondent's position necessarily presupposes that the judgment of the probate court remained in effect. However, while the circuit court at the first trial did enter judgment for the same amount as approved by the probate court, that judgment was subsequently reversed by this court. Therefore, the only judgment now in existence which respondent could be entitled to enforce and which could bear interest pursuant to Section 408.040 is the one entered on June 6, 1956.
Respondent relies on In re Thomasson's Estate, Mo.Sup., 192 S.W.2d 867. There a judgment was obtained in the circuit court against a decedent's estate for attorney fees which subsequently was affirmed on appeal. It was held that the claimants were entitled to interest on their judgment from the date of its entry in the circuit court by reason of what is now Section 408.040. The facts of the Thomasson case are not applicable to this case. Whatever rights respondent had by reason of the allowance of the demand in the probate court were replaced by the judgment of the circuit court in the first trial, and that judgment was reversed. We know of no authority for interest to be allowed on a judgment retroactive to a time prior to its rendition. Therefore, the trial court erred in allowing interest on a part of the judgment entered on June 6, 1956, retroactive to May 17, 1954.
Appellant also contends that it was "improper for plaintiff in the argument to make statements concerning the failure of the administratrix, as an heir, to take care of the deceased during her lifetime." In the argument portion of the brief appellant sets out some statements by respondent's counsel to the effect that Mrs. Lillard, who with her brother would inherit the estate, lived only 40 miles from Miss Ellison during the latter years of her life and did not do anything to care for her. By turning to the portions of the argument which appellant has included in the transcript we find that the objections were made under the following circumstances. In the principal argument to jury respondent's counsel stated: "Now, what did they [Mr. and Mrs. Lillard] testify to? About all there is in this record that they testified to, was that during all of this time they were living in Hannibal, forty miles from Canton, but there was not a single thing they ever told you they ever did for Nellie Ellison. They never told you they ever inquired about her; they never even heard from her; they never even went to see her or * * *." The objection was, "We object to that as clearly outside the evidence. There is nothing in the evidence to warrant that statement." The evidence does show that Mrs. Lillard lived in Hannibal, and the record does not show that she and her husband did anything to care for Miss Ellison. It was not entirely immaterial that Mrs. Lillard did not provide care for Miss Ellison. She was the nearest relative, and respondent's evidence tended to prove that although Miss Ellison needed care there was no one to whom she could turn but Mrs. Prentice, and that Mrs. Prentice provided the care that was needed. This would have some bearing on the quantity and value of the services rendered by Mrs. Prentice. Therefore the argument up to the time of this objection was not prejudically erroneous for the reason set forth in the objection.
Counsel for respondent then did make the statements which appellant has set out in the argument portion of his brief and which he contends were improper. Counsel also made some comments which were entirely *548 proper and about which there is no challenge or question. After the argument had continued for some time, appellant interposed his second objection as follows: "We are objecting to all that line of argument."
The alleged misconduct of counsel during trial must be called to the attention of the trial court, and the trial court must, by request for instant action and ruling, be given an opportunity to grant relief. Blanford v. St. Louis Public Service Co., Mo.Sup., 266 S.W.2d 718. Here counsel did not point out to what he was objecting except to "all that line of argument." Where all the preceding argument is not erroneous, as was true in this case, this objection will not suffice. The objection made here was no more than saying "I object to that" which was held not to be an adequate objection under similar circumstances. Sollenberger v. Kansas City Public Service Company, 356 Mo. 454, 202 S.W.2d 25.
One further objection was made to the oral argument. In the closing argument respondent's counsel made a comment to the effect that appellant wanted to keep the whole estate. Appellant's general objection was overruled with the comment that "It's in answer to your argument." Appellant's argument is not in the transcript and therefore we cannot determine whether the trial court was in error. Under the circumstances we do not find prejudicial error resulted from the oral argument.
Appellant's next point is as follows: "The trial court erred in refusing to allow defendant'switness, Mary Jolly, to testify as to the value of services based on a hypothetical question. The witness was qualified to answer the questions propounded." No cases are cited. The total argument in the brief on this question is: "We submit that defendant's witness, Mary Jolly, was qualified to answer the hypothetical question propounded to her and that it was error for the court to sustain the objection to her testimony."
When Mrs. Jolly was asked if she had an opinion as to the value of the services enumerated in a hypothetical question, respondent objected because "there has been no qualification shown by this witness." The trial court sustained the objection without comment. In this unsatisfactory state of the record we have read carefully her testimony, and everything that was said in connection therewith, to see if there appears a clear abuse of the trial court's discretion in sustaining the objection. In this situation, as in the presentation by respondent of evidence of the qualifications of Dr. Jennings, there was much to be desired. However, we note that this witness testified that she had done practical nursing only in Hannibal, Missouri. She did not testify that she had done any work in Lewis County or that she was familiar with the compensation paid in Lewis County for services of the type rendered by Mrs. Prentice. Perhaps the trial court had in mind the following statement from Love v. Richardson, Mo.App., 61 S.W.2d 220, at 222, where in ruling on a similar contention it was said: "Defendants claim the court erred in excluding the testimony of Addie Spencer a practical nurse. It was shown that she had done no practical nursing in Pike County, Mo.; her experience being confined to Hannibal, Mo. The trial court, therefore, properly held that she was not qualified to testify in this case as to the value of the services rendered."
The burden was on appellant to show on this appeal that the trial court abused its discretion in sustaining the objection to the qualification of Mrs. Jolly, and we must hold that she has not done so.
Appellant's last point is that the "verdict and judgment is excessive and was not supported by the evidence and the law under the evidence." Following this are two sub-points as follows: "(a) Claimant neither kept nor presented an account for her services during the six years and more that said services are claimed to have been *549 rendered. The failure in this respect affords some evidence which is adverse to the claim of plaintiff. (b) The witness, as to the value of services rendered, did not base his opinion as to actual value."
At no place in the brief is there a statement of the amount the judgment is considered to be excessive, and, therefore, it does not affirmatively appear that appellant would consider $7,157.60 to be excessive. There was ample evidence to show that Mrs. Prentice did render services and that they were of substantial value. While it is true that Mrs. Prentice did not keep a record of her services, this was a matter to be considered by the jury, as appellant in substance admits. Appellant does not identify the witness referred to in part (b) of her point, but apparently it was Dr. Jennings. The question he answered was so worded to call for the "reasonable value" of the services, and that was proper. Under the circumstances we cannot say that a judgment in the amount of $7,157.60, which is the maximum amount we will permit to stand, would be excessive.
If respondent will within fifteen days enter in this court a remittitur in the amount of $2,842.40 and of all interest on the judgment prior to June 6, 1956, a judgment in the amount of $7,157.60 with interest from June 6, 1956, will stand affirmed; otherwise the judgment is reversed and the cause is remanded for new trial.
BOHLING and BARRETT, CC., concur.
PER CURIAM.
The foregoing opinion by STOCKARD, C., is adopted as the opinion of the Court.
All concur.
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982 F. Supp. 620 (1997)
Cindy R. RODENBECK, Individually and as Personal Representative of the Estate of James C. Rodenbeck, deceased, Plaintiff,
v.
NORFOLK & WESTERN RAILWAY COMPANY, Defendant.
No. 1:96-CV-378.
United States District Court, N.D. Indiana, Fort Wayne Division.
June 6, 1997.
Robert L. Thompson, Hoffman Thompson Skekloff Rogers and McNagny, Fort Wayne, IN, for Plaintiff.
John C. Duffey, Elizabeth B. Searle, Stuart and Branigin, Lafayette, IN, for Defendant.
*621 MEMORANDUM OF DECISION AND ORDER
COSBEY, United States Magistrate Judge.
I. INTRODUCTION
This matter is before the Court[1] on the motion of the Defendant Norfolk and Western Railway Company ("NW"), filed April 24, 1997. NW seeks a protective order and a motion in limine concerning evidence, testimony and opinions relating to certain correspondence (the "Etzler-DeLaCroix correspondence") produced to the Plaintiff by a third-party during discovery regarding a certain railroad grade crossing in Allen County, Indiana, the subject of this lawsuit. (See Def. Exhs. A-E.)
On May 8, 1997 the Plaintiff, Cindy R. Rodenbeck ("the Plaintiff"), individually and as personal representative of the Estate of James C. Rodenbeck ("Rodenbeck"), deceased, filed a brief in opposition.
On May 21, 1997, NW replied.
This Court has jurisdiction based on diversity. See 28 U.S.C. § 1332.
II. FACTUAL AND PROCEDURAL BACKGROUND
On June 9, 1995, Rodenbeck was driving a truck eastbound on Notestine Road. Notestine Road intersects with NW's single mainline track at a grade crossing marked with cross-buck yield signs and advance railroad warning signs. Rodenbeck allegedly failed to yield to the southbound train at the grade crossing and was struck by the train.
Approximately two years before, the Federal Railway Administration ("FRA") and the Federal Highway Administration ("FHWA") had distributed The Highway and Rail Safety Newsletter. (See Def. Exh. A.) This document discussed changes in federal regulations concerning the installation of STOP and YIELD signs at grade crossings and included factors to consider in selecting and identifying grade crossings that might warrant STOP signs. The newsletter encouraged railroads to cooperate with states, communities and federal agencies on the selection of grade crossings for the installation of such signs.
On May 9, 1994, a NW Vice-President, Clifford DeLaCroix ("DeLaCroix"), corresponded with the Executive Director of the Allen County Highway Department, William Etzler ("Etzler"), regarding these guidelines. DeLaCroix supplied Etzler with a list of NW grade crossings in Allen County that might qualify for STOP signs under the guidelines, including Notestine Road. (See Def. Exh. B.) NW then offered to pay half the cost of installing the STOP signs. (Id.) On May 16, 1994, Etzler responded that he would review the matter. (See Def. Exh. C.) Over a year later, on July 11, 1995, DeLaCroix contacted Jack McComb ("McComb"), President of the Allen County Commissioners, to again raise the possibility of installing STOP signs, and also advised him of NW's relatively positive experience at crossings equipped with such signs. (See Def. Exh. D.) Notably, he pointed out that the "overall number of collisions at all [NW] crossings in Indiana in the first four months of 1995 [showed] a 28.7% decrease from a similar period in 1994." (Id.) In his opinion, this decrease was "directly related to the number of stop signs" that had been installed in the twenty counties and eleven municipalities that had responded to the 1994 newsletter discussed supra.
On August 1, 1995, Etzler, apparently speaking for Allen County, rejected NW's offer on the grounds that it was "woefully inadequate considering the liability Allen County would assume from installation of stop signs." (See Def. Exh. E.) Instead, Etzler suggested that NW install "signalized crossings" on a shared basis with Allen County. (Id.)
NW has now moved for an order in limine to prevent the Plaintiff from admitting as evidence, or otherwise referring to, any of the Etzler-DeLaCroix correspondence (including the one letter between DeLaCroix and McComb) in the trial of this action. It *622 also seeks a protective order under Fed. R.Civ.P. 26(c) and 23 U.S.C. § 409 ("§ 409") prohibiting any further discovery regarding or based on that correspondence, whether it be factual testimony or expert opinions.
In support of its motion, NW argues that § 409 provides protection against the discovery and admissibility of documents that, in part, identify and plan grade-crossing safety enhancements:
Notwithstanding any other provision of law, reports, surveys, schedules, lists, or data compiled or collected for the purpose of identifying[,] evaluating, or planning the safety enhancement of potential accident sites, hazardous roadway conditions, or railway-highway crossings, pursuant to sections 130, 144, and 152 of this title or for the purpose of developing any highway safety construction improvement project which may be implemented utilizing Federal-aid highway funds shall not be subject to discovery or admitted into evidence in a Federal or State court proceeding or considered for other purposes in any action for damages arising from any occurrence at a location mentioned or addressed in such reports, surveys, schedules, lists, or data.
23 U.S.C. § 409 (footnote omitted).
In response, the Plaintiff argues that § 409 must be construed restrictively. In so doing, she indicates that the documents were supplied to her counsel in response to a discovery request directed to the Allen County Highway Department ("ACHD") and the Indiana Highway Department of Transportation ("INDOT"), even though both entities withheld other documents that they believed properly fell within the protection of § 409. Ultimately, the Plaintiff observes that the Notestine Road grade crossing was approved for the installation of flashing warning signals under the Transportation Improvement Program ("TIP") of the Federal Highway Administration ("FHA") and thus concedes that discovery of information compiled in connection with that determination is barred. However, she contends that the Etzler-DeLaCroix correspondence had no relation to either the TIP; 23 U.S.C. §§ 130, 144 or 152; or, any improvements that might be accomplished with federal funds. Moreover, in her view, the correspondence simply does not contain any "reports, surveys, schedules, lists or data compiled or collected" in connection with a federally funded program or project, so as to deserve § 409 protection. At bottom, however, the Plaintiff characterizes the DeLaCroix proposal to Allen County as one independent of any federal program. Indeed, the Plaintiff argues that NW was actually attempting to induce Allen County to enter into an improper sign-placement program at its passive railroad crossings in violation of federal guidelines, without approval of either INDOT or the FHA, and without federal financing.
The Plaintiff also somewhat generally argues that to apply § 409 in this case would needlessly sacrifice Indiana's tort scheme well beyond the contemplation of the United States Supreme Court in CSX Trans. Inc. v. Easterwood, 507 U.S. 658, 113 S. Ct. 1732, 123 L. Ed. 2d 387 (1993). Finally, the Plaintiff urges that if there are any unresolved factual questions surrounding the subject correspondence, NW's motion is premature.
In reply, NW argues that the Etzler-DeLaCroix correspondence falls within the scope of § 409 because it relates to a proposal that could have been accomplished with federal funds. Moreover, NW contends that merely because either INDOT, or the ACHD, turned over the Etzler-DeLaCroix correspondence in response to a discovery request does not mean that it was per se discoverable.
Primarily, of course, NW argues that the Etzler-DeLaCroix correspondence was produced to develop a highway-rail construction project (regardless of whether it was approved or completed), and that in general it presents the very type of candid communications that are intended for exemption from discovery, and admissibility at trial, under § 409. NW also argues that the protection provided by § 409 is not merely limited to documents created pursuant to §§ 130, 144 and 152, but also extends to documents that relate to the development of any highway improvement or safety project that may implement federal funds. Thus, NW argues that it does not need to fit the Etzler-DeLaCroix *623 correspondence into a §§ 130, 144 or 152 pigeon-hole to receive § 409 protection, but only needs to show that the project could have conceivably been federally funded. In short, as NW sees it, because the correspondence obviously related to the possible identification, evaluation and planning of safety enhancements at a highway-rail crossing, it falls within § 409. Finally, NW rejects the notion that its motion is premature.
III. DISCUSSION
The question before the Court is whether the Etzler-DeLaCroix correspondence falls within the plain language of § 409. This inquiry is important because the Seventh Circuit in Harrison v. Burlington Northern RR Co., 965 F.2d 155 (7th Cir. 1992), held that § 409:
[w]ithdraws the broad latitude of discretion ordinarily allowed judges in evidentiary matters and bars the reception of evidence as it states that the "reports, surveys, schedules, lists or data" within the statute "shall not be admitted into evidence in federal or state court or considered for other purposes in any action for damages arising from any occurrence at a location mentioned or addressed in such reports, surveys, schedules, lists or data."
Id. at 159; see also Shots v. CSX Trans., Inc., 887 F. Supp. 204, 205 (S.D.Ind.1995) (noting that since Harrison, the statute was amended to extend to discovery).
At the same time, the Seventh Circuit held that § 409 extends to any projects that could have conceivably been financed by federal funds. Harrison, 965 F.2d at 160; Shots, 887 F.Supp. at 205. Moreover, § 409 encompasses not only grade crossing safety enhancement documents, but also any testimony about those documents. Id.
The ostensible basis for § 409 is to "facilitate candor in administrative evaluations of highway safety hazards," and to prohibit federally required record-keeping from being used as a "tool ... in private litigation." Harrison, 965 F.2d at 160 (citing Robertson v. Union Pacific RR Co., 954 F.2d 1433, 1435 (8th Cir.1992)). Thus, simply put, if the Etzler-DeLaCroix correspondence falls within § 409's rather expansive scope, then NW's motion must be granted.
Here, the administrators of the FHWA and FRA developed guidelines to identify grade crossings which might qualify for the installation of STOP signs. This guidance later became the subject of The Highway and Rail Safety Newsletter, which encouraged FHWA and FRA regional directors to work with the various states, communities and railroads on the possible installation of appropriate safety signage. This communication led to the Etzler-DeLaCroix correspondence concerning the identification and evaluation of railroad grade crossings in Allen County that might qualify for STOP signs under the guidelines suggested by the FHWA and FRA.
In initiating the correspondence, DeLaCroix attached a list of crossings in Allen County, including Notestine Road, that in his opinion qualified for STOP signs under the FHWA/FRA guidelines. (See Def. Exh. B.) Later, in a further effort to assist in the evaluation of the efficacy of these safety enhancements, DeLaCroix advised the Allen County Commissioners that it had been the recent experience of NW that the installation of STOP signs had resulted in a reduction in collisions at grade crossings in the State of Indiana. (See Def. Exh. D.)
Notably, § 409 expressly shields for evidentiary and discovery purposes certain information pertaining to grade crossing construction improvement projects that fall under either 23 U.S.C. § 130, or "which may be implemented utilizing Federal-aid highway funds...." This latter point is significant because the installation of STOP signs at Notestine Road became eligible for federal funding after the 1992 amendment to the Manual on Uniform Traffic Control Devices for Streets and Highways ("MUTCD"). More specifically, the installation of traffic control devices in accordance with the MUTCD at highway-rail grade crossings is eligible for federal funding under 23 C.F.R. § 655.607 since such a project involves "construction," as that term is defined by 23 *624 U.S.C. § 101(a).[2] In addition, Notestine Road would also have fallen under the provisions of 23 U.S.C. § 130(a) given its provision that "the entire cost of construction [as defined in 23 U.S.C. § 101(a)] of projects for the elimination of hazards of railway-highway crossings ... may be paid from [federal funds]." Thus, under either provision of § 409, it is certainly "conceivable" that the placement of STOP signs at the Notestine Road grade crossing would have qualified for federal funding. (See Def. Exh. B); Harrison, 965 F.2d at 160. Indeed, such a reading underscores the premium placed on ensuring a candid assessment of grade crossing safety issues. 965 F.2d at 156 n. 3.
Nevertheless, while STOP signage was eligible for federal funding, NW still had to deal with the ACHD since it was within Allen County's discretion (see Def. Exh. A Attachment 1) whether STOP signs should be installed at Notestine Road. (See 23 U.S.C. § 402; Def. Exh. R.) Thus, if NW wanted to place STOP signs at Notestine Road, it was required to not only cooperate with the ACHD, but also to establish the need for those signs prior to any submission to INDOT. (See Def. Exh. B.) Indeed, this purpose was the thrust of the correspondence at issue, to provide "data" for the purpose of "identifying, evaluating or planning" a proposed safety enhancement[3]
Moreover, the mere fact that the ACHD did not accept NW's suggestion does not mean that the Etzler-DeLaCroix correspondence does not fall within § 409. Indeed, the language of § 409 is not limited in any way to only approved or completed plans; to hold otherwise would chill the candor that is expected in administrative evaluations of highway safety standards-a recognized danger that § 409 was designed to cure. See Harrison, 965 F.2d at 160. It would also mean that the operative effect of § 409 would turn on the discretionary determinations of various local agencies, none of whom are likely to be mindful of the policy dictates of § 409.[4]
At bottom then, the Etzler-DeLaCroix correspondence was generated in a candid effort to assess the efficacy of STOP signs at Notestine Road and other locations throughout Allen County. Thus, these documents, and the anticipated testimony, certainly fall within the intent of § 409-to facilitate candor in administrative evaluations of highway safety standards. Id. If a railroad knows that its candid efforts of persuasion directed to a local government that possesses discretionary authority may ultimately be used against it, the railroad will be far less forthcoming in offering any "data" by which that discretion can be exercised, and indeed may choose not to offer safety suggestions at all.
Finally, the Plaintiff seemingly argues that § 409 should only apply when there is Easterwood-type preemption, (see Resp. Br. at 12); and, that to apply § 409 where Easterwood does not apply would inappropriately transgress upon Indiana's tort scheme. Easterwood preemption occurs when a federal statute has established a standard of care in conjunction with the expenditure of federal funds. 507 U.S. at 670-72, 113 S.Ct. at 1741. On the other hand, § 409 applies regardless of the actual expenditure of federal funds, and indeed, as discussed supra, seeks to dictate the admissibility and discoverability of documents authored solely in the interest of developing safety enhancement projects-events that frequently occur, as they did here, well before the expenditure of any federal funds.
*625 Finally, if unresolved questions of fact exist, rendering the motion premature, they have not been disclosed. Therefore, the motion will be granted.
IV. CONCLUSION
For the foregoing reasons, Defendant's motion is hereby GRANTED. However, the Court's ruling is not intended to preclude testimony, expert or otherwise, as to the general efficacy of placing STOP signs at Notestine Road, or the effect they would have had if they had been installed. Such evidence, to the extent deemed admissible, however, must come from sources apart from the Etzler-DeLaCroix correspondence.
NOTES
[1] Jurisdiction of the undersigned Magistrate Judge is based on 28 U.S.C. § 636(c), all parties consenting.
[2] 23 U.S.C. § 101(a) defines the term "construction" in pertinent part as: "[A]ll expenses incidental to the construction or reconstruction of a highway, including ... elimination of hazards of rail grade crossings ... and improvements which directly facilitate and control traffic flow...."
[3] "Data" is defined as: "Information, especially information organized for analysis or used as the basis for a decision." The American Heritage Dictionary of the English Language (Family Edition 1979). The mere fact that the "data" was in the form of correspondence does not mean that it deserves less protection.
[4] The Plaintiff also argues that, in her considered view, Notestine Road did not qualify for Stop signs under the factors catalogued by the FRA and FHWA. (See Def. Exh. A.) However, her conclusion carries no weight in this argument because the discretion of Allen County was paramount, and many factors (not just the single contraindicator upon which Plaintiff focuses) needed to be considered.
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306 S.W.2d 687 (1957)
Heartsill RAGON, Special Administrator, Appellant,
v.
Alex DAY, Sr., et al., Appellees.
No. 5-1369.
Supreme Court of Arkansas.
November 11, 1957.
Hardin, Barton, Hardin & Garner, Ft. Smith, for appellant.
Gordon & Gordon, Morrilton, for appellee.
*688 HOLT, Justice.
This litigation stemmed from a collision of two passenger automobiles which resulted in personal injury to Alex Day, Sr.'s two minor sons, Alex, Jr., and Clarence, who were in one of the cars, and the death of James A. Widmer (21 years of age) who was driving the other car. Appellee, as father and next friend of his sons, sued appellant for personal injury damages to Alex, Jr., and Clarence Day, for the loss of their services in their minority, and for car damage. Appellant interposed a general denial, pleaded contributory negligence of appellees, and in a cross-complaint sought damages against appellees. At the conclusion of all the evidence, the trial court directed a verdict against appellant on his cross-complaint. A jury trial resulted in a verdict and judgment for appellee, Alex Day, Sr., in the amount of $995.80, for Clarence Day the sum of $175, and for Alex Day, Jr., in the amount of $10,000. This appeal followed.
Some ten witnesses testified for appellees as to the cause of the collision and how it happened, and appellant offered none. The evidence showed that at about 8 o'clock a. m. on October 7, 1956, on a clear day, Alex Day, Jr. (19 years old), was driving his father's car westerly on highway 64 just a short distance out of Conway, Arkansas. Clarence Day (his 17 year old brother) was riding with him. While they were thus traveling toward their home at a speed of about 40 miles per hour and on the right side of the 22-foot concrete pavement, their car was struck in the rear by an on-coming car being driven in the same direction by Widmer. The pavement, at the point where the collision occurred, was a straight-away for about a mile and the point of collision was about mid-way of this straight-away, and there was an un-obstructed view, with no other traffic, for about one-fourth mile in both directions. As indicated, the mishap occurred in the right portion of the highway on which the boys were traveling in the proper traffic lane for their use and while the Day car was in the act of making a right-hand turn off the highway to Day's home. The evidence further shows that Alex Day, Jr., when the Widmer car was about one-fourth mile behind him, began giving a right-hand turn signal, to slow down, and continued to signal until he began making the right-hand turn and had his right front wheel on the right shoulder of the highway. At this instant it appears that Widmer's car struck him in the rear with such force that the Day car was knocked over and driven for some 125 feet, and the Widmer car, following the impact, traveled some 50 feet. Both cars were almost completely wrecked. Appellee's witness, Tessie Talley, tended to corroborate appellee's testimony. She testified that, "At the time of the collision I was standing at my window on the front of the house. The window faces the highway and I can look and see the highway. I saw this boy with his hand out and up. When I looked again I didn't see anything other than the car sitting there. I did not see the collision. I saw Alex Day, Jr. with his hand up.
"`Q. Did you know at the time who it was?
"`A. Well, at that time I thought it was his mother.'
I know the automobile, when I heard the crash I went out my back door and rushed down to where it was and no one was coming either way. * * *."
Also, the testimony of State Trooper, Stone, and Sheriff Hawkins as to the physical facts, at the point of the collision, was of a corroborative nature. Appellant offered only the testimony of Widmer's parents who testified as to his age, education, earnings and their mental anguish because of the loss of their son.
For reversal, appellant first contends that the trial court erred in denying him a mis-trial. It appears that after counsel for appellant had introduced a two-page signed statement of appellee, Alex Day, Jr., and while appellee's attorney was questioning *689 him on re-direct examination, the following occurred:
"Q. Did you write this statement out yourself? A. No, sir.
"Q. This statement is dated October 11, 1956. Where were you at that time? A. I was in the hospital.
"Q. St. Anthony's Hospital? A. Yes, sir.
"Q. Were you flat on your back? A. Yes, sir.
"Q. In traction? A. Yes, sir.
"Q. Do you know who took the statement? A. No, I don't know his name, he said something about being an insurance man * * *. (Italics ours.)
"Mr. Garner: Your Honor, I ask for a mistrial.
"The Court: The Jury will be admonished not to consider any reference to insurance or an insurance adjustor, because that has no part in the trial at all. The question is whether or not the plaintiffs and the defendant were or were not guilty of negligence. You will not consider the question of insurance for any purpose.
"Mr. Garner: Save our exceptions."
We hold appellant's contention untenable for two reasons. First, the answer given was not responsive to the question. Certainly it was proper for appellee to know the name of the person who took Day's statement within five days after Day's injury and while he was flat on his back in traction in a hospital, in the absence of Day's attorney. Day's answer, "No. I don't know his name" would have fully answered the question asked and the remainder of his answer, "He said something about being an insurance man", was not responsive to the question and purely voluntary information on the part of the witness. In addition, the trial court, by his prompt admonition to the jury, we think, removed any possible prejudicial effect on the jury. In the case of Malco Theatres, Inc., v. McLain, 196 Ark. 188, 117 S.W.2d 45, 50, where the following situation presented itself:
"When the appellee was being examined on her direct examination she was asked to tell exactly how the injury occurred and what treatment was given, and she answered: `And then, on the 14th day of June I went back because it hadn't healed as well as we thought it should heal and the doctor told me then if it didn't do better, why, I would have to wear a brace and go on crutches. And then the insurance company wanted an X-ray, I think.' Here the witness was interrupted and the appellant objected and moved the court to declare a mistrial. The court said to the jury: `That is withdrawn from you, gentlemen of the jury. Don't consider that statement as any evidence in this case. It is wholly improper.'" We there said, "The record shows clearly that the attorney for appellee did not ask anything about insurance and that the appellee, in answering the general question, made some statement about the insurance adjuster. She was immediately interrupted, and the court in no uncertain terms told the jury that they could not consider it. If there was any prejudicial effect, what the court said removed it, and there was no error in the court's refusing to grant a mistrial."
What we said in the above case applies with equal force here.
Second, the appellant contends that the court erred in directing a verdict against him on his cross-complaint and in giving instructions five and six. We do not agree to either contention. As we read this record, we are unable to find any substantial testimony (and appellant points to none) that the Day boys were guilty of contributory negligence or any negligence whatever. Such was the effect of the jury's verdict. While the testimony of the *690 two Day boys, since they are interested parties here, will not be taken as undisputed, it was corroborated by other witnesses, Tessie Talley and the two officers, and was ample to support the verdicts. Instructions five and six contained a clear statement of the reciprocal rights and duties, under our statutes, of the drivers of two automobiles on a public highway going in the same direction and we hold were correct. In other instructions the court clearly told the jury, "* * * that if you find from a preponderance of the evidence that at the time and place of the alleged collision, Alex Day, Jr., and Clarence Day, sustained personal injuries as the proximate result of some act of negligence, upon the part of James A. Widmer, deceased, then if you so find, your verdict should be for the plaintiffs. * * *. If the jury finds from the evidence heard in the trial of this case, that James A. Widmer, deceased, was not guilty of any act of negligence as alleged proximately causing the alleged personal injuries and damages alleged by the plaintiffs, Alex Day, Sr., Alex Day, Jr., and Clarence Day, then if the jury so finds, your verdict should be for the defendant, Heartsill Ragon, as Administrator of the Estate of James A. Widmer, deceased. * * *. The question of whether or not, James A. Widmer, deceased, was guilty of some act of negligence as alleged by plaintiffs, in their complaint, proximately causing the alleged personal injuries and property damages complained of by plaintiffs, is a matter and issue for the jury to determine from the evidence heard in the trial of the case as held admissible and all instructions given by the court, all of which should be considered by the jury."
As indicated, the jury placed the negligence on appellant alone and we hold that the court did not err in dismissing the appellant's cross-complaint in the circumstances. Our rule is that where from the undisputed facts all reasonable minds would reach the conclusion that the injured person acted as an ordinary prudent person under the circumstances and was free of negligence, then it becomes a question of law for the court. Kansas City So. Ry. Co. v. Lewis, 80 Ark. 396, 97 S.W. 56. In Cary Bros. & Hannon v. Morrison, 8 Cir., 129 F. 177, 181, 65 L.R.A. 659, an Arkansas case, the Court said: "The question of contributory negligence, like every question of negligence, is ordinarily for the jury; and it is only when there is no substantial conflict in the evidence which conditions it, and when, from the undisputed facts, all reasonable men, in the exercise of a fair judgment, would be compelled to reach the same conclusion, that the court may lawfully withdraw it from them." And in Bumpas v. Sinclair Refining Co., 191 Ark. 571, 87 S.W.2d 29, 31, it is stated: "Usually the existence of contributory negligence which will bar a recovery is a question of fact for the jury's consideration and judgment. * * * But if the testimony in this regard be such that all reasonable minds must reach the same conclusion, then it resolves itself into a question of law."
But, says appellant, the court should have given an instruction on our comparative negligence statute, Act 191 of 1955 in effect when the present action arose. The answer to this is that the appellant made no such request for such instruction or offered any such instruction.
Finally contention is made that the verdicts were excessive, especially the $10,000 verdict in favor of Alex Day, Jr. We do not agree. Alex's physician testified, in effect, that Alex was confined to a hospital for a total of 26 days and was under his treatment from October 7, 1956 to February 27, 1957, about four months and 20 days, and that total medical and hospital bills amounted to $548.30. This physician testified that Day's injuries consisted of cerebral concussion, a dislocated left shoulder, a dislocation of the 5th cervical vertebra, and a compressed fracture of the 4th and 5th thoracic vertebra. He further testified that Alex would have stiffness, *691 limitation of motion, and some pain in the area of the injury to the neck which will be permanent. Day was in traction for about three weeks which is a painful process. After he was discharged from the hospital he was put in a supportive cast which extended from the waist up, enclosing the body, chest and neck with support to the chin. He was in a cast for six weeks.
There was other evidence that young Day was a student at Philander Smith College in Little Rock, earning $36 per month at the Albert Pike Hotel in off hours, that since his injury he has headaches, and that his vision has been weakened making it necessary for him to wear glasses. It appears that young Day has a life expectancy of approximately 48 years. On the measure of damages, the court correctly told the jury, "If you find from a preponderance of the evidence that the plaintiff, Alex Day, Jr., is entitled to recover in this action for alleged personal injuries, then in determining the compensation to be awarded him, if any, you may consider the nature and extent of such injuries, if any, any physical pain and suffering endured or suffered as the result of the injuries, if any, and the duration of same; any mental anguish occurring as the result of such injuries, if any, and any loss of earnings resulting from injuries, if any, and the extent of same, if any loss is found to have been sustained."
While the jury has no definite yardstick by which to measure damages in a case such as this, the amount of an award must largely be left to the judgment of the jurors and unless we can say that the amount of the judgment was induced by prejudice or is so unreasonably excessive as to shock the conscience of the court, we do not disturb it, Grandbush v. Grimmett, Ark., 297 S.W.2d 647. On the evidence here we do not find that any of the verdicts are excessive. Accordingly, the judgment is affirmed.
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306 S.W.2d 433 (1957)
AERIAL SPRAYERS, Inc., Appellant,
v.
YERGER, HILL & SON et al., Appellees.
No. 10510.
Court of Civil Appeals of Texas, Austin.
October 16, 1957.
Rehearing Denied November 6, 1957.
*434 Hart, Brown, Sparks & Erwin, Austin, for appellant.
C. C. Jopling, John C. Marburger, La Grange, for appellees.
HUGHES, Justice.
This is a venue case.
Yerger, Hill & Son, a partnership, the owner of farm lands in Bastrop County, and its crop sharing tenants, E. P. Foytik, Lloyd L. Burns, John Burns and Joe Kadalich, all residents of Bastrop County, sued, in the District Court of Fayette County, Aerial Sprayers, Inc., a corporation, and W. A. Rosanky to recover for damage to their growing cotton crop alleged to have been caused by and resulted from the act of Aerial Sprayers in spraying by aircraft the Rosanky farm with a hormone herbicide known as 2,4-D, on April 14, 1955.
W. A. Rosanky is a resident of Bastrop County. Aerial Sprayers, Inc., has its principal office in Jones County.
Rosanky filed a cross action against Aerial Sprayers praying, in the event of judgment against him, that he have judgment over against it by way of indemnity or contribution.
Aerial Sprayers filed pleas of privilege to both the main suit and the Rosanky cross action and both were overruled.
Appellant has twenty-three points, grouping for briefing points 1, 3, 5, 7, 9, 11, 13, 15, 20, 21, 22 and 23 relating to the failure of appellees to prove at all or by a preponderance of the evidence that any act or omission by it caused the damage to the cotton crop on the Yerger lands.
The evidence shows that growing cotton on the Yerger farms was damaged by a hormone type herbicide within the period for damage to normally appear following the spraying of the Rosanky farm.
The following facts are also reflected by the evidence.
Mr. J. E. Hooper, Jr., Aerial's president, made an agreement with Mr. Rosanky to spray his farm, located partly in Bastrop and Fayette Counties with 2, 4-D and he testified as follows:
"Q. Prior to the time that you did the spraying, did you make any investigation in the territory four or five miles to determine whether or not there was any cotton growing and up? A. Mr. Rosanky told me there was no cotton *435 near. We drove through there and we didn't see any of it.
"Q. You do know that this herbicide is likely to drift as much as eight or ten milesdo you know that? A. Under some conditions, yes.
"Q. Did you make an effort to find out whether or not there was any cotton within eight or ten miles where you were spraying already up? A. Yes, sir, we discussed that at length.
"Q. And you knew and had knowledge, Mr. Hooper, that if this herbicide got on to cotton which had up, it was up an inch and a half or two or three inches, why it would damage it, did you not? A. Yes, sir.
* * * * * *
"Q. You do know, Mr. Hooper, in your experience that this herbicide has been known to escape from and drift away from the place where you have been doing the spraying? A. To a certain distance, yes.
"Q. And you know that that element of danger is there whenever you do your spraying? A. Yes, sir."
The Yerger lands, some of them, are located near Smithville, Bastrop County, about five miles north and a little east of the Rosanky farm.
The wind direction when the Rosanky farm was sprayed was south southwest which would place the Yerger farms directly in the wind path.
The Commissioner of Agriculture of Texas, under statutory authority,[1] has promulgated regulations governing the sale and use of hormone type herbicides. These regulations require a permit if more than 10 acres is to be sprayed in one year.
The evidence shows that the application to spray the Rosanky farm was the only one procured in the vicinity of the farm during the period of contamination for the Yerger lands.
Mr. C. T. Wallace, an employee of the State Department of Agriculture, testified:
"Q. Now concerning the source of the hormone-type of herbicide that did the damage you saw and observed, it is pure speculation as to where the herbicide came from, isn't it? A. I will state it this way. We made what we thought was quite a thorough investigation and we could find no evidence of other spraying.
"Q. Where did you go to make that investigation that you regarded as thorough? A. In and around Smithville.
"Q. Did you go outside of Bastrop County? A. Yes, sir, we went in Fayette County.
"Q. You made your investigation in Bastrop and Fayette Counties? A. Yes, sir.
* * * * * *
"Q. In response to this question asked you by Mr. Jopling, you stated that no other spraying was done in a certain territory in April of 1955; what territory did you have in mind? A. The Smithville area.
"Q. And what is included in the Smithville area? A. We checked the record for Bastrop and Fayette County both.
"Q. What you really mean to say and all you can testify to is that the records of the Department of Agriculture do not show any permit to anybody else for a spray operation in either Bastrop or Fayette Counties during the month of April 1955. A. That is correct.
"Q. You have no way in the world of knowing whether someone might *436 have used a fogging machine on the ground or whether someone might have used an aerial spray device without getting permission from the Department of Agriculture. A. That is correct.
* * * * * *
"Q. * * * I believe you testified that you all made a determined investigation as you possibly could to determine whether or not there was any herbicide spraying any other place in that territory other than at Mr. Rosanky's? A. Yes, sir.
"Q. And from your investigation you now say that the results of your findings was that such was the only spraying that had been done? A. Yes, sir.
* * * * * *
"A. * * * We found no evidence of other spraying in that vicinity that could have caused this damage.
"Q. Other than Mr. Rosanky's spraying? A. Yes, sir."
It is our opinion that the above evidence is some evidence of causation. It is substantial evidence of a circumstantial nature that the herbicide loosed by Aerial drifted onto the Yerger lands and damaged the cotton growing thereon. It is within the realm of possibility, of course, that the deadly potion came from other sources. These possibilities, however, do not, as a matter of law, destroy the cogency of the facts related above nor the ultimate conclusion to which they lead.
To the extent that the points under consideration question the existence of any evidence of causation they are overruled and we will proceed to dispose of the contention that the finding of causation is so against the preponderance of the evidence as to be manifestly wrong.
The only witness for appellant was Mr. Hooper, its president. He was present when the Rosanky lands were sprayed by Aerial. His testimony was that an inspector for the Department of Agriculture was present to observe the spraying; that he and the inspector did observe the spraying and that it was done strictly in accordance with the prescribed rules and regulations.
We need not detail the testimony of Mr. Hooper. It is completely exculpatory and if accepted by a fact finder would show causation between the spraying and the crop damage to be an impossibility.
Without in any sense detracting from the credibility of Mr. Hooper we cannot say that his testimony or the testimony of any interested witness of the nature presented is sufficient to justify us in holding that the finding of causation is so against the preponderance of the evidence as to be clearly wrong.
Appellant's points, 2, 4, 6, 8, 10, 12, 14, 16, 20, 21, 22 and 23 relate to the failure of appellees to prove any negligence on the part of appellant or to their failure to prove such negligence by a preponderance of the evidence.
Appellees, except Rosanky, pleaded many grounds of negligence including the allegation that appellant and Rosanky were negligent in failing to confine the herbicide to the Rosanky farm. This pleaded a specific act of negligence. Haynes B. Ownby Drilling Co. v. McClure, Tex.Civ.App. Austin, 264 S.W.2d 204, writ ref., N.R.E. See, also, Vrazel v. Bieri, Tex.Civ.App. Galveston, 294 S.W.2d 148, writ ref., N.R.E.
We have discussed the evidence above and in our opinion it is sufficient to sustain a fact finding of negligence in failing to confine the herbicide to the Rosanky farm and such finding is not so against the preponderance of the evidence as to be clearly wrong. See Schultz v. Harless, Tex.Civ. App. El Paso, 271 S.W.2d 696.
It is our opinion that, under the evidence, venue of this cause was properly laid, as to appellant, in Fayette County under subd. 23 of Art. 1995, V.A.C.S., providing *437 that suits against a private corporation may be brought in the county in which the cause of action or a part thereof arose.
Some of the spraying was done in Fayette County. This was part of the cause of action.
Appellant does not contend that venue of the Rosanky cross action should be different from venue of the main suit.
Appellant's other points relate to venue exceptions not necessary to discuss.
We affirm the judgment of the Trial Court.
Affirmed.
NOTES
[1] Art. 135b-4, Vernon's Ann.Civ.St.
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205 B.R. 909 (1997)
In re Robert G. TREMBATH, Debtor.
In re Jerry J. JANECEK, Debtor.
UNITED STATES of America, Plaintiff,
v.
Robert G. TREMBATH, Defendant.
UNITED STATES of America, Plaintiff,
v.
Jerry J. JANECEK, Defendant.
Bankruptcy Nos. 94 B 22771, 91 B 8624, Adversary Nos. 96 A 00511, 96 A 00510.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
March 10, 1997.
*910 Gregory K. Stern, Chicago, IL, for debtor.
Charles J. Cannon, Vienna, VA, for the I.R.S.
MEMORANDUM OPINION
RONALD BARLIANT, Bankruptcy Judge.
Both adversary proceedings are before the court on similar disputes with the Internal Revenue Service. The debtors filed petitions under chapter 13 and their plans, which provided that priority tax claims would be paid in full, were confirmed. The IRS, however, never filed a proof of claim in either case. The debtors completed their plan payments, discharge orders were entered and the cases were closed. The IRS later discovered that the debtors had significant liabilities for "trust fund taxes" and proceeded to attempt to collect those taxes from the debtors. The debtors' attorney, who was the same in both cases, notified the IRS that the taxes had been discharged in bankruptcy. The IRS continued its collection efforts and the debtors moved to have their cases reopened and the IRS sanctioned for violation of the discharge injunction. Once the cases were reopened, the IRS filed complaints to determine the dischargeability of the trust fund taxes. Now pending before this Court are cross motions for summary judgment on those complaints and the debtors motions for sanctions.
BACKGROUND
The facts in each case, as established by the parties' statements under Local Rule 402[1], are as follows:
Robert Trembath, Case No. 96 A 511
Robert Trembath filed a petition under chapter 13 of the Bankruptcy Code on November 15, 1994. During the two years preceding *911 the filing of the petition he was the sole shareholder and in charge of day-to-day operations of Household Appliance Sales & Service. During that period, Household failed to pay over federal income and employment taxes that had been withheld from the wages of Household's employees. Household also did not file the quarterly employment tax returns (Form 941) until June 4, 1994. Household made an assignment of all of its assets in August 1994.
When Trembath filed bankruptcy in November, 1994, he listed the IRS as a creditor on his schedules. Trembath listed the IRS because he knew of his potential liability for trust fund taxes (as withholding taxes are called), and trust fund taxes are entitled to a priority under § 507(a)(8)(C).[2] He listed the IRS's claim as unliquidated, contingent and disputed. He listed the total amount of the liability as "Unknown." But, in the space where he was asked how much of the debt would be entitled to priority distribution under the bankruptcy code, he said "O." He so scheduled the IRS claim even though he did not owe any taxes other than his potential liability for trust fund taxes.
Bankruptcy Rule 1007(b)(1) requires debtors to file statements of financial affairs in accordance with the official forms. Official Form 7 requires any debtor who has been "an officer, director, managing executive, or owner of more than 5 percent of the voting securities of a corporation" within the two years before their bankruptcies to answer questions 16 through 21 of the statement. Trembath did not answer those questions.[3] If he had answered those questions, his statement would have disclosed his recent relationship to Household, and, according to the affidavit filed by the IRS, would have enabled the IRS to discover his tax liability in time to file a proof of claim.[4] In the event, however, the IRS never filed a proof of claim.
The debtor's plan provided that "[t]ax claims . . . entitled to priority pursuant to 11 U.S.C. 507 shall be paid in full. . . ." That plan was confirmed. Trembath made all payments required by the plan and an order was entered on September 11, 1995, discharging him from "all debts provided for by the plan," with exceptions not relevant here. Because the IRS never filed a proof of claim, it never received any payments under the plan.
On December 1, 1995, the IRS sent a letter to Trembath advising him of his liability for trust fund taxes in the amount of $64,332.51. The debtor's attorney responded by a letter dated December 26, 1995, advising the IRS that the debtor had filed bankruptcy and that the civil penalty had been "provided for by the Debtor's Chapter 13 plan." Nonetheless, the IRS assessed Trembath for taxes under 26 U.S.C. § 6672. On the debtor's motion, the bankruptcy case was reopened and on April 25, 1996, the IRS filed this adversary proceeding to determine the dischargeability of its claim for the trust fund taxes.
Jerry Janecek, 96 A 510
Jerry J. Janecek filed a petition under Chapter 13 of the Bankruptcy Code on April 22, 1991. Prior to that filing, Janecek had been the sole shareholder and in charge of day-to-day operations of LaGrange Automotive, Inc. ("LaGrange"). For approximately two years before the filing, Janecek stopped paying over taxes that had been withheld from LaGrange's employees. Janecek continued to file the quarterly form (Form 941), but failed to make any of the required deposits.
The schedules filed by Janecek with his bankruptcy petition listed the IRS as a creditor, but indicated that the amount was "Unknown" and that the debt was "Contingent-Unliquidated." *912 The chapter 13 statement Janecek was required to complete asked whether he had "operated a business in partnership or otherwise during the past three years?" He falsely answered "NO."
Janecek's chapter 13 plan provided for full payment of all tax obligations entitled to priority under § 507(a)(8) and was confirmed on April 22, 1991. Thereafter, but while the case was pending, the IRS sent Janecek two notices concerning his potential liability for trust fund taxes. Janecek's attorney responded to both notices, advising the IRS that a chapter 13 case was pending and that its actions violated the automatic stay. Notwithstanding these notices, the IRS never filed a proof of claim or took any other action in the case. Janecek completed all payments required under the plan and a discharge order was entered on March 13, 1995.
On July 31, 1995, the IRS issued a notice indicating that it had assessed Janecek for trust fund taxes and penalties in the amount of $18,808.36. The debtor's attorney responded by a letter dated August 15, 1995, advising the IRS that the taxes had been "provided for" in the debtor's plan and discharged. It was not until April 25, 1996 that the IRS filed the present complaint.
DISCUSSION
The debtors have moved for summary judgment on the basis that the taxes were provided for in their plans and discharged. In its cross-motions for summary judgment the IRS argues that the debtors fraudulently concealed their prior business operations and, therefore, (1) the tax claims were not "provided for" in the plans and therefore not discharged, (2) the debtors are estopped from relying on the discharge, (3) the debtors should not be afforded relief because their hands are dirty, and (4) the "plans" should be "dismissed."
Discharge of Taxes under Chapter 13
Discharge in a chapter 13 case is governed by § 1328(a). That section provides (emphasis added):
(a) As soon as practicable after completion by the debtor of all payments under the plan, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, [with exceptions not relevant here].
Under § 1328(a), therefore, a debt is discharged if two conditions are satisfied: the debtor made all the payments required by the plan, and the debt was "provided for" in the debtor's plan. There is no dispute that the debtors made all of the payments under the plan. The only issue is whether the taxes were "provided for."
One of the requirements for confirmation of a chapter 13 plan is that it provide for "full payment" of all claims entitled to priority under § 507(a)(8), which includes tax claims such as these. § 1322(a)(2). Both of the debtors' plans provided that "[a]ll claims entitled to priority under 11 U.S.C. Section 507 shall be paid in full in deferred cash payments. . . ."
The debtors' correctly state that a majority of courts have concluded that the above quoted plan provision satisfies the requirement that a plan provide for payment of the taxes, provided the tax creditor was scheduled or had notice of the bankruptcy case. See Leber, supra, 134 B.R. at 914-915 (the plan does not have to name the governmental creditor as long as it generally provides for the payment of taxes); In re Gregory, 705 F.2d 1118 (9th Cir.1983); In re Vlavianos, 71 B.R. 789 (Bankr.W.D.Va.1986); In re Daniel, 107 B.R. 798 (Bankr.N.D.Ga.1989). Indeed, the leading treatise on chapter 13 has a three page footnote citing cases (most of which involve the IRS or state taxing authorities on the losing side) in support of the statement that: "If a creditor fails or refuses to timely file proof of a prepetition claim, the claim is discharged if the plan provided for payment of the claim had a proof of claim been filed." II K. Lundin, Chapter 13 Bankruptcy, § 9.13, fn. 36 (1991).
None of the cases relied upon by the debtors, however, involved a fraudulent concealment of an individual debtor's prior *913 business operations.[5] Here, the concealment of the prior business operations was equivalent to failure to give notice of the pending bankruptcy petition since it precluded the IRS from tying the debtors' contingent liabilities for the trust fund taxes to the entity with primary responsibility for payment. Where the petition does not give the creditor sufficient notice to allow the creditor to determine that a debt exists, it would be inconsistent with notions of due process and fundamental fairness[6] to hold that the debt was "provided for by the plan." See In re Hairopoulos v. United States, 193 B.R. 889, 892 (E.D.Mo.1996)("If [] the IRS did not receive proper notice of the proceeding, then its claim cannot be considered to have been provided for by the plan."); In re Friedman, 184 B.R. 883 (Bankr.N.D.N.Y.1994), aff'd, 184 B.R. 890 (N.D.N.Y.1995); In re Gamble, 85 B.R. 150 (Bankr.N.D.Ala.1988). The present cases are more analogous to those of the debtors who operated under other names or trade names. In cases where the debtor fails to give the creditor notice of the aliases or trade names, the courts have concluded that the notice was inadequate and the debts not discharged. See Friedman, supra; Gamble, supra.
In Friedman, although the petition listed an employer identification number for a prior business, it did not set forth the name of the business nor did any of the notices sent to the state taxing authority include any reference to any business operated by the debtor.[7] The taxing authority timely filed a secured proof of claim (after confirmation), but the plan provided that no payment would be made and the lien would be terminated. The taxing authority did not object to the plan and it was confirmed. When the debtor filed a motion to disallow the claim, the court concluded that the notice was inadequate to bar the taxing authority from enforcing its lien stating:
Initially, [], it is the debtor who has the responsibility for providing creditors with specific substantive notice on which they can make an informed decision as to whether to involve themselves in the `confirmation process.' A creditor should not have to undertake its own independent investigation to discover the true identity of a debtor in order to protect its rights. Friedman, 184 B.R. at 890 (emphasis added). See also In re Anderson, 159 B.R. 830 (Bankr.N.D.Ill.1993).[8]
Gamble did not involve debts to taxing authorities, but did involve a debtor who failed to disclose a prior alias. The petition was filed under the name Eula Kyle Gamble; she had previously been known as Eula M. Kyle.[9] Although the debtor scheduled her debt to SouthTrust Bankcard, the creditor did not have an account in the debtor's name and therefore did not file a proof of claim. Due to the inadequate notice, the court concluded that the debt had not been "provided for" and was therefore not discharged under § 1328. The rule that a debt is provided for in a plan only if the creditor *914 had adequate notice follows from the rule that a claim is allowed only if a proof of claim is filed. See, § 502(a). A creditor deprived of adequate knowledge will not file a proof of claim. In that event, the debt will not be paid no matter what the plan says. A debtor has an obligation to complete the petition and schedules completely and accurately. Anderson at 839. Where the debtor fails to satisfy that burden, it is not the creditor who should suffer.[10] In the present cases, the debtors' failure to answer the questions concerning prior business operations prevented the IRS from tying the individual debtors' contingent liabilities to the entity primarily responsible. This Court concludes that notices of the individual cases were insufficient to satisfy due process and fundamental fairness. While the IRS received notice of the relationship between Mr. Janecek and LaGrange while the case was still pending, the notice was not received until after the plan had been confirmed. Accordingly, this Court finds that the taxes were not "provided for" by the plan and were therefore not discharged under § 1328(a). Although this conclusion resolves the cross motions for summary judgment (in the IRS' favor), the Court will address the remaining issues raised by the parties.
Equitable Grounds for Denying Effect of Discharge
Alternately, the IRS argues that the debtors should be estopped from relying on the discharge, or denied relief under an "unclean hands" theory because they fraudulently concealed their liabilities for trust fund taxes. The problem with these arguments is that they are being made after two final, appealable orders have been entered (the confirmation and discharge orders). In re Puckett, 193 B.R. 842, 845 (Bankr.N.D.Ill.1996). In other words, the IRS is attempting to collaterally attack final orders entered in both these cases.[11] Such attacks are, however, severely restricted.
Section 1328(e) sets forth limited means for revoking discharge orders. It allows a court to set aside a discharge order for fraud, but the deadline for requesting this relief is one year from entry of the discharge order. That time limit has expired in both cases so the remedy under § 1328(e) is not available.
At least one court has applied Fed. R.Civ.P. 60 (applicable to bankruptcy proceedings by Fed.R.Bankr.P. 9024) to revoke a discharge order. See In re Cisneros, 994 F.2d 1462 (9th Cir.1993). In Cisneros, however, the IRS had timely filed a proof of claim but was never paid. The standing trustee incorrectly advised the court that all plan payments had been made and the court entered a discharge order. The order should not have been entered and the court vacated it under Rule 60(b). Since Rule 60(b) conflicts with an express provision of the Bankruptcy Code (§ 1328(e)), most courts have limited to its holding to a court's "inherent power to correct its own clerical errors." Daniels, 163 B.R. at 897, quoting, In re Ford, 159 B.R. 590, 593 (Bankr.D.Or.1993). This Court agrees that Rule 60(b) should not be generally applied to vacate discharge orders and that Cisneros should be limited to its facts.[12]
Because the orders of discharge can no longer be revoked, there is no reason to consider the underlying grounds asserted for revocation, namely the debtors' failure to fully disclose their prior business operations in their Statement of Financial Affairs and *915 other allegations of fraudulent concealment. No matter how much evidence the IRS may have in support of these arguments, concepts of finality and res judicata would prevent them from raising them this late in the game.
Dismissal of the "Plan"
Finally, the IRS contends that this Court should dismiss the debtors' plans, since confirmation was obtained by subterfuge. The argument makes no sense because a plan is not "dismissed." A plan is either confirmed or not confirmed; it is never "dismissed." A case may be dismissed (§ 1307), but not a plan. Moreover, if what the IRS is really asking for is to have the confirmation orders revoked, it faces the same problems as it does obtaining revocation of the discharge order. It has waited too long. An order of confirmation may be revoked under § 1330(a) if the order of confirmation was procured by fraud, but the request for revocation must be made within 180 days after entry of the confirmation order.
In asking this Court to "dismiss the plans," the IRS relies upon In re Ekeke v. United States, 133 B.R. 450 (S.D.Il.1991), an opinion which was thoroughly discussed and rejected by Judge Wedoff in a similar case involving the IRS. See Puckett, supra. As explained by Judge Wedoff, the court in Ekeke repeatedly referred to dismissal of the debtor's "plan" when the relief actually provided was dismissal of the case under § 1307. Moreover, the Ekeke court failed to even consider limitations on revocation of confirmation contained in § 1330.
In any event, the "plan" in Ekeke was dismissed before an order of discharge was entered. Consequently, even if that opinion were correct, it does not govern the outcome in this case. Accordingly, the Court rejects the IRS' argument that the "plan" or case should be "dismissed."
CONCLUSION
The debtors failed to disclose prior business operations in their schedules. While the IRS was listed as a creditor, the information omitted by the debtors prevented the IRS from ascertaining that they had a claim against the debtors for trust fund taxes. Because the notice did not comply with due process and fundamental fairness, the Court finds that the trust fund taxes were not "provided for by the plan" and, therefore, were not discharged. Accordingly, the debtors' motion for summary judgment are denied and the IRS' cross-motions for summary judgment are granted on the issue of discharge of the taxes. Because the taxes were not discharged, the IRS cannot be sanctioned for attempting to collect the taxes. Accordingly, the debtors motions for sanctions against the IRS are also denied. Separate orders will be entered in accordance with this Opinion.
NOTES
[1] The standards for summary judgment have been adequately explained in numerous opinions and need not be repeated here. See In re Leber, 134 B.R. 911, 913-14 (Bankr.N.D.Ill.1991).
[2] Unless otherwise stated, all section references are to the Bankruptcy Code 11 U.S.C. § 101 et seq.
[3] Indeed, the form of statement he filed did not even include those questions; it stopped after question 15. His declaration under penalty of perjury that all his answers were true and correct therefore apparently had no application to questions 16-21.
[4] Question 16, for example, requires an individual debtor to list the corporations of which he was an officer, director, managing executive or significant shareholder within two years before bankruptcy. In Trembath's case the answer would have been Household.
[5] In Leber the taxing authority was not scheduled, but it received notice of the chapter 13 case by the Bankruptcy Clerk's Office. A corporation owned by the debtor was being liquidated under chapter 7. The corporate case was referenced in the chapter 13 case so the taxing authority had the ability to tie the individual debtor to a corporate tax. Unlike Leber, here the IRS had no way of tying the debtors to the corporate liabilities due to the debtors' concealment of the prior business operations. The remaining cases relied upon by the debtors did not involve "trust fund" taxes, where an individual debtor's liability is contingent upon non-payment by the business entity. Those cases are, therefore, inapposite.
[6] The due process clause does not apply to governmental entities; instead, courts apply a test of fundamental fairness. In re Anderson, 159 B.R. 830, 836-838 (Bankr.N.D.Ill.1993), citing, United States v. Cardinal Mine Supply, Inc., 916 F.2d 1087 (6th Cir.1990).
[7] Failure to provide that information in the petition was in violation of Fed. R. Bankr.P. 1005.
[8] Anderson involved similar facts, but the issue was whether the taxing authority should be permitted to file late claims under the circumstances. Like the debtors in our case, Mr. Anderson also left the questions in the statement of financial affairs concerning past business operations blank. The court concluded that the debtor's failure to complete the schedules "was a gross abuse of the bankruptcy process" and equity required allowance of the late claim. Anderson, 159 B.R. at 839-40.
[9] Both names should have been listed in the petition under Bankr.Rule 1005.
[10] The Debtors claim that they answered the questions correctly because they were "employees" of their businesses. That claim is frivolous. The questions had to do with their ownership and operational control of their business entities. That they were technically employed by the entities they owned and controlled is wholly beside the point.
[11] This is not the first time the IRS has found itself in this position and it has raised many different theories to avoid the harshness of this result, but generally to no avail. See United States v. Lee, 184 B.R. 257 (D.Va.1995) (arguing that liability for trust fund taxes arises when the "responsible officer" is assessed); Puckett (raising similar arguments to those propounded here).
[12] Even if Rule 60(b) were available, relief from final orders on the grounds of "mistake, inadvertence, surprise, or excusable neglect" and "fraud" must be requested within one year of entry of the order.
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205 B.R. 62 (1997)
In re PENN STATE CLOTHING CORPORATION, Debtor.
Bankruptcy No. 92-16361DAS.
United States Bankruptcy Court, E.D. Pennsylvania.
February 13, 1997.
*63 Andrew N. Schwartz, Trustee, Philadelphia, PA.
Louis Hockman, Snitow & Snitow, Philadelphia, PA, for Trustee.
David C. Shuter, Obermayer, Rebmann, Maxwell & Hippel, Philadelphia, PA, for Debtor.
Kenneth F. Carobus, Philadelphia, PA, for Creditors' Committee.
Leslie B. Gaynus, Philadelphia, PA, for PA. Dept. of Labor & Industry.
Prince Altee Thomas, Philadelphia, PA, for PA. Dept. of Revenue.
Robert J. Hoelscher, Philadelphia, PA, for Ernst & Young.
Lynne P. Fox, Meranze and Katz, Philadelphia, PA, for Philadelphia Joint Board, ACTWU.
Arthur P. Liebersohn, Philadelphia, PA, Trustee for 640 North Broad Street Partnership.
Barbara J. Backman, Philadelphia, PA, for 604 North Broad Street Partnership.
Frederic Baker, Ass't. U.S. Trustee, Philadelphia, PA.
SUPPLEMENT TO OPINION OF JANUARY 8, 1997
DAVID A. SCHOLL, Chief Judge.
This court received three separate motions requesting reconsideration of certain aspects of our Opinion and Order of January 8, 1997, in this case, presently reported only at 1997 WL 10355, 204 B.R. 161 ("the Opinion"):
1. The "Objector," ultimately identified as the (former) Creditors' Committee of the Debtor, (1) disputed the application of In re Benjamin Coal Co., 978 F.2d 823 (3d Cir. 1992), to this controversy, but (2) also asserted, in the alternative, that the fee applications filed and approved in this case should be considered as "informal" proofs of claim against the Debtor's estate;
2. The United States Trustee ("the UST") disputed that aspect of the Opinion holding that the basis of the fee application claims should be the entire allowed claims of each professional, rather than, as she contended, the unpaid balances; and
3. The Trustee sought to be relieved from the time deadlines set forth in the Opinion in light of the pendency of the other motions for reconsideration.
This court partially responded to the motions in an Order of January 23, 1997 ("the Order"). Therein, we directed the Trustee to proceed with any necessary objections to claims, on the assumption that the Opinion would remain essentially intact, on or before January 31, 1997, to avoid any unnecessary further delay in the administration of this case. We also stated as follows regarding the UST's motion:
2. The court is not certain precisely what the UST is urging, or what authority it has for its position. In order to better understand its position, the court requests the UST, after consultation with the Trustee, to prepare amended proposed distributions (1) consistent with the Order as it stands; and (2) consistent with the position of the UST, on or before February 4, 1997.
Next, we noted that the Objector's contention that its fee applications should be considered as informal proofs of claim appeared to have much more merit than its expressed points of difference with Benjamin Coal. Finally, we invited all of the parties to make submissions arguing their own positions or opposition to any other party's contentions on or before February 7, 1997, prior to hearings scheduled on all three motions on February 11, 1997.
The primary goal of the Order was to permit all interested parties to make full *64 commentary on the pronouncements made in the Opinion, which would appear to impact distributions in other cases converted to Chapter 7 after Chapter 11 plans were confirmed, as well as the instant case. A secondary goal was to prevent further delay in effecting the final distribution in this long-outstanding case.
The Trustee proceeded to file objection to the claims of the Philadelphia Joint Board ACTWU and the 640 North Broad St. Partnership on the ground that the administrative classifications of these claims, arising in the course of the Chapter 11 phase of the case, are no longer correct. Those Objections are listed for hearings on March 13, 1997.
Only the Objector accepted our invitation to make a February 7, 1997, submission. Moreover, the Objector devoted most of its attention to a contention that Benjamin Coal was wrongly decided and hence subject to be disregarded by this court or at least narrowly applied by us to only cases where a debtor engages in "substantial operations" post-confirmation in Chapter 11 before succumbing to conversion.
Unfortunately for the Objector, this court does not have the luxury of ignoring the precedent established by the Third Circuit Court of Appeals in Benjamin Coal. See In re Gelletich, 167 B.R. 370, 374-75 (Bankr.E.D.Pa.1994); and In re Taras, 136 B.R. 941, 948-50 (Bankr.E.D.Pa.1992). Moreover, the Objector is incorrect in its assertion that the principle that Chapter 11 administrative claims are to be treated with parity to general unsecured claims after confirmation of a Chapter 11 plan and conversion to Chapter 7 was erroneously "based" upon In re Official Committee of Unsecured Creditors of White Farm Equipment Co., 943 F.2d 752 (7th Cir.1991), cert. denied, 503 U.S. 919, 112 S. Ct. 1292, 117 L. Ed. 2d 515 (1992), and/or was entirely unprecedented.
It is true that the Benjamin Coal court cited White Farm, 978 F.2d at 827-28. However, it was merely to distinguish White Farm and other multiple filing cases cited by the appellant in that case from the case at bar. This holding was not "based" on the result in White Farm. Furthermore, as we noted in the Opinion, at *3, the conclusions in Benjamin Coal were presaged by the decision in In re Fashion Spear, Inc., 15 B.R. 137, 140 (Bankr.W.D.Pa.1981) (COSETTI, J.) (decided under the Bankruptcy Act). We therefore conclude that we must continue to fully abide by Benjamin Coal, as noted in the Opinion, and further note that we do not view the result there as aberrational or unique. In its February 7, 1997, submission and at argument on February 11, 1997, the Objector cited In re Larsen, 169 B.R. 404, 407-08 (D.S.D.1994), rev'd, 59 F.3d 783 (8th Cir.1995), in support of its attempt to limit the application of Benjamin Coal to a case where the putative Chapter 11 administrative claim was discharged under the terms of the plan. However, we note above that the Larsen decision was ultimately reversed.[1]
The Objector fares better in its contention that its fee applications, and those of other Chapter 11 professionals, should be viewed as timely filed and allowed as "informal" proofs of claim. The applications were clearly filings which satisfy the requirements for "informal" proofs of claim as being
in the form of a pleading filed in the Bankruptcy Court which shows "that a demand is made against the estate" and "the creditor's intention to hold the estate liable." [In re] Ungar, 70 B.R. [519,] at 521-23 [(Bankr.E.D.Pa.1987)] (quoting In re Thompson, 227 F. 981, 983 (3d Cir. 1915)).
In re Wilbert Winks Farm, Inc., 114 B.R. 95, 97 (Bankr.E.D.Pa.1990). Accord, e.g., In re Charter Co., 876 F.2d 861, 863-64 (11th Cir. *65 1989); In re Pizza of Hawaii, Inc., 761 F.2d 1374, 1379-80 (9th Cir.1985); In re Dauer, 165 B.R. 146, 147 (Bankr.D.N.J.1994); Hatzel & Buehler, Inc. v. Station Plaza Associates, L.P., 150 B.R. 560, 561 (Bankr.D.Del. 1993); and In re Dietz, 136 B.R. 459, 462-64 (Bankr.E.D.Mich.1992).
The Trustee argues that the Objector declined our invitation in the Opinion, at *4, to file late, formal claims under the principles set forth in Pioneer Investment Services Co. v. Brunswick Associates, L.P., 507 U.S. 380, 387-95, 113 S. Ct. 1489, 1494-98, 123 L. Ed. 2d 74 (1993); In re Pennsylvania Truck Lines, Inc., 189 B.R. 331, 335-37 (Bankr.E.D.Pa. 1995); and In re Sacred Heart Hospital of Norristown, 186 B.R. 891, 894-98 (Bankr. E.D.Pa.1995), and therefore should not be permitted to assert its claim in any other manner. However, the passage referenced in the Opinion was merely intended to be illustrative of a means by which Chapter 11 professionals could attempt to obtain distributions in this case. The informal proof of claim doctrine is an acceptable, and in fact more appropriate, alternative measure. No formal proof of claim need be filed to amend the informal fee application claim because the amount of the claim has already been fixed by court order.
The final issue is the UST's contention that our requirement that the basis of fee application claims should be the balances due on the applications at the time of conversion rather than the total allowed fee applications, deducting therefrom the amounts paid. In response to the Order, the UST submitted calculations purporting to establish that all distributees would receive less under the Opinion formula than under the UST's formula.
However, this is because the UST, in her calculations, refrained from proposing a distribution of the excess sums withheld from professionals who had already received more than their share of the distribution based on the total fees allowed. It is apparent to us that this excess sum not distributed to "overpaid" Chapter 11 professionals must be distributed pro rata to general unsecured creditors, including "underpaid" Chapter 11 professionals. When this supplemental distribution is effected, all but the "overpaid" Chapter 11 professionals receive a larger distribution under the Opinion's formula than under the UST's formula, the latter of which allows "overpaid" professionals to remain overpaid.
The only arguments left to the UST are that (1) Benjamin Coal does not discuss this particular aspect of distribution in a converted Chapter 7 case; (2) the authorities relied upon in the Opinion, In re North Bay Tractor, Inc., 191 B.R. 186, 187-88 (Bankr. N.D.Cal.1996); and In re Metropolitan Electric Supply Co., 185 B.R. 505, 512 (Bankr. E.D.Va.1995), did not involve confirmed plans; and (3) the Opinion formula is more complex, requiring, as it does, multiple "stages" of calculations.
We agree that the issue of how to make distributions among "overpaid" and "underpaid" former Chapter 11 professionals is not addressed in Benjamin Coal. However, it is discussed in North Bay Tractor and Metropolitan Electric, and these are the only decisions known to this court to discuss this issue in any factual contexts. These two decisions are consistent, and were persuasive to us in addressing the goal of equalizing the distributions. We perceive no significant distinction in the rights of distributees due to the mere circumstance of the case having achieved confirmation prior to conversion. And we perceive no greater administrative difficulty in calculating distributions in previously-confirmed converted Chapter 11 cases than in cases in which confirmations have never occurred.
Therefore, except for directing the Trustee to consider the former Chapter 11 professionals fee awards as informal proofs of claim and allowing the Trustee an extension until March 31, 1997, after the resolution of objections to claims now scheduled for hearings on objections to proofs of claim on March 13, 1997, to file a proposed amended order of distribution consistent therewith, the results of the Opinion shall be sustained in the following order.
ORDER
AND NOW, this 13th day of February, 1997, upon consideration of the motions asking *66 for reconsideration of certain aspects of our Opinion and Order of January 8, 1997 ("the Opinion"), filed by the United States Trustee, the Trustee, and "the Objector" (apparently the former Creditors' Committee of the Debtor), and the submissions by the parties relevant thereto, and the arguments at the hearing on the motions of February 11, 1997, it is hereby ORDERED as follows:
1. The objections to the claims of the Philadelphia Joint Board filed by the Trustee are listed on a must-be-heard basis on THURSDAY, MARCH 13, 1997, AT 9:30 A.M. and shall be held in Bankruptcy Courtroom No. 4 (Room 3620), Third Floor, United States Court House, 601 Market Street, Philadelphia, PA 19106.
2. The Trustee or his counsel shall file any necessary amended proposed distribution order consistent with the Opinion and with this Supplemental Opinion, and serve a certification of such filing upon the United States Trustee and the court in chambers on or before MARCH 31, 1997.
3. Any objections to the aforesaid proposed amended distribution order shall be filed and served on or before APRIL 7, 1997.
4. In the event an Order for Distribution is entered shortly thereafter, the Trustee or his counsel shall thereafter file, and serve a certification of such filing upon the court in chambers, the cancelled checks and zero bank statement; or an affidavit, pertaining to disbursements made pursuant to The Order of Final Distribution, setting forth that there is a zero balance in the account and that the cancelled checks are no longer available on or before SEPTEMBER 1, 1997.
NOTES
[1] We do note that Benjamin Coal's pronouncements are apparently limited to cases in which a plan is confirmed in Chapter 11 prior to conversion, a limitation which we failed to appreciate in our comments in In re Cohen, 1997 WL 47623, at *1 (Bankr.E.D.Pa. Feb. 3, 1997). Also, we note that the parties agreed that unsecured creditors would be entitled to only the percentage of their claims payable under the terms of a confirmed plan in a distribution, and not their entire claim. This factor is not an issue here because the Debtor's confirmed plan contemplated a one hundred (100%) percent payment to unsecured creditors. We express no opinion as to whether the parties are correct on this point.
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989 F. Supp. 691 (1997)
William J. KERTH, M.D. and E. Lawrence Hanson, M.D., Plaintiffs,
v.
HAMOT HEALTH FOUNDATION, et al., Defendants.
Civil Action No. 95-212.
United States District Court, W.D. Pennsylvania.
September 30, 1997.
*692 *693 Mark L. Rosenberg, Alan A.B. McDowell, Jacobovitz Law Firm, Washington, DC, Arthur N. Lerner, Michaels, Wishner & Bonner, Washington, DC, Jeffrey S. Jacobovitz, Michaels, Wishner & Bonner, Washington, DC, for William J. Kerth, M.D., E. Lawrence Hanson, M.D.
James R. Walczak, W. Patrick Delaney, Craig R.F. Murphey, Eric J. Purchase, Gerald J. Stubenhofer, MacDonald, Illig, Jones & Britton, Erie, PA, for Hamot Health Foundation, Inc., the Hamot Medical Center, of the City of Erie, Pennsylvania.
David Marx, Jr., Brent R. Austin, McDermott, Will & Emery, Chicago, IL, for George J. D'Angelo, M.D., George F. Kish, M.D., Dennis J. Michalak, M.D., Prabhaker G. Sardesai, M.D., Wilfredo S. Tan, M.D., George J. D'Angelo, M.D., Thoracic and Cardiovascular Associates, P.C., and Thoracic and Cardiovascular Associates, Inc. dba D'Angelo Clinic.
S.E. Riley, Jr., Conner & Riley, Erie, PA, Jack R. Bierig, Richard D. Raskin, Bruce M. Zessar, Sidley & Austin, Chicago, IL, for Medicor Associates, Inc.
Eric J. Purchase, MacDonald, Illig, Jones & Britton, Erie, PA, for Hamot Health Systems, Inc.
Shirley J. Christian, Harrington & Mitchell, Youngstown, OH, for Western Reserve Care System, an Ohio Not-For-Profit Corporation.
Barbara Blackmond, Horty, Springer & Mattern, Pittsburgh, PA, for Columbia Mercy Medical Center.
Linda R. Mittleman, Cleveland, OH, for University Hospitals of Cleveland.
Edward R. Ehrhardt, Jr., Pittsburgh, PA, for Shadyside Hospital.
MEMORANDUM OPINION AND ORDER
McLAUGHLIN, District Judge.
This antitrust case involves alleged restraint of trade in the practice of open heart surgery in Erie, Pennsylvania. Plaintiffs are two cardiovascular surgeons who have sued (1) the hospital at which they used to work, (2) a group of cardiologists who used to refer cases to them and (3) a competing group of cardiovascular surgeons. Plaintiffs claim the competing surgeons coerced the hospital and the cardiologists into conspiring to destroy their practice by denying them referrals. Plaintiffs' six count complaint alleges violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, as well as state law claims for antitrust violations and tortious interference with prospective business relations.
Presently before the Court are motions for summary judgment filed on behalf of the following Defendants:
1. The D'Angelo Clinic, George J. D'Angelo, M.D., George F. Kish, M.D., Prabhaker G. Sardesai, M.D. and Wilfredo S. Tan, M.D. [Doc. No. 116].
2. Medicor Associates, Inc. [Doc. No. 124].
3. Hamot Health Foundation and Hamot Medical Center of the City of Erie, Pennsylvania [Doc. No. 137].
We have consolidated these motions for purposes of this Memorandum Opinion and Order. For the reasons set forth below, Defendants' motions for summary judgment will be granted.
I. BACKGROUND
Cardiovascular surgeons derive the majority of their open heart surgery cases through referrals. The typical referral pattern for a heart patient is from a primary care physician to a cardiologist and then, if the patient needs surgery, to a cardiovascular surgeon. Obviously, the surgery is performed in a hospital that has the appropriate facilities. Thus, to succeed in the business, a cardiovascular surgeon needs surgical privileges at a hospital and a stable source of referrals.
*694 The Parties
The Defendants in this case are: (1) Hamot Health Foundation and Hamot Medical Center of the City of Erie, Pennsylvania (collectively "Hamot"); (2) Medicor Associates, Inc. ("Medicor"); and (3) the D'Angelo Clinic and various of its individually named employees (collectively the "Clinic" or the "Clinic Defendants").
Hamot is a 480-bed hospital in Erie that provides a wide range of inpatient services including open heart surgery.[1] Hamot has a three-part organizational structure consisting of (1) a Board of Directors, (2) an Administrative Staff and (3) a Medical Staff. The Board has ultimate authority over the operation of the hospital, including establishment of hospital policy and the credentialling of physicians. The Administrative Staff has been delegated responsibility for the day-to-day operation of the hospital. The Medical Staff consists of physicians who have been granted privileges to practice at Hamot.
Medicor is group of cardiologists and internists that have practiced at Hamot since 1973. Currently, Medicor employs eleven cardiologists and three internists. The Medicor cardiologists receive the majority of their heart patients through referrals from other practitioners. Medicor has never employed cardiovascular surgeons and does not compete in the practice of open heart surgery. When a Medicor heart patient requires surgery, that patient is always referred to a cardiovascular surgeon. Medicor is the dominant cardiology group[2] at Hamot and serves as the primary source of referrals for open heart surgeries performed at Hamot.
The Clinic and its individually named employees are a group of cardiovascular surgeons that competed with the Plaintiffs at Hamot. The Clinic Defendants still practice at Hamot. The Clinic was founded in the 1960s by Dr. George D'Angelo.[3] Dr. D'Angelo is a well known and respected figure in the Erie medical community. Dr. D'Angelo performed the first open heart surgery in Erie in 1962; and also performed the first coronary bypass and valve replacement surgeries in Erie. Currently, the Clinic consists of four active cardiovascular surgeons who perform over 600 open heart surgeries at Hamot annually.
The Plaintiffs are E. Lawrence Hanson, M.D. ("Dr. Hanson") and William J. Kerth, M.D. ("Dr. Kerth"). Drs. Hanson and Kerth are cardiovascular surgeons who lost their open heart surgery privileges at Hamot in 1992 and 1993 respectively because they failed to perform enough open heart surgeries to meet Hamot's minimum surgical volume requirement.[4] Plaintiffs then filed the instant antitrust action, claiming their lack of surgeries was the result of a conspiracy to destroy their practice by depriving them of referrals.
Open Heart Surgery at Hamot
At Hamot, as at many other hospitals, neither the cardiologists nor the cardiovascular surgeons are Hamot employees. Rather, they are independent specialists who have been granted privileges to practice their specialty at the hospital.[5] Hamot does, however, *695 set staffing policies and regulates the practice of specialties, including cardiovascular surgery.
For example, in 1983 Hamot placed a moratorium on granting new cardiovascular surgical privileges. The moratorium, however, was not inflexible. At various times, Hamot's Board lifted the moratorium to permit the recruitment of new cardiovascular surgeons. As discussed in more detail below, Dr. Hanson was the beneficiary of such action on several occasions.
Additionally, in August 1983, Hamot's Board authorized the formation of a committee to investigate issues relating to cardiovascular surgery at the hospital. As a result of the committee's work, in April 1984 the Board adopted a number of rules regulating cardiovascular surgery. The Board passed a "First Surgical Assistant Rule" ("FSAR"). Under the FSAR, two board certified cardiovascular surgeons were required to participate in every open heart surgery, one as the primary surgeon and the other as a first assistant. The stated purpose of the FSAR was to ensure the presence of two qualified surgeons during every procedure. This rule was in effect during the events giving rise to this case but was later abandoned when it came under criticism for, among other things, an inefficient use of surgeons' time.
The Board also established an open heart surgery volume requirement. Under the volume requirement, cardiac surgeons were required to perform at least one hundred open heart surgeries per year, twenty-five of which must be as the primary surgeon, in order to maintain their privileges. The stated purpose of the volume requirement was to ensure that surgeons participated in enough procedures to maintain their technical proficiency. The rule was supported by contemporary studies linking volume and lower mortality rates. See Pontius v. Children's Hospital, 552 F. Supp. 1352 (W.D.Pa.1982).
In October 1986, Hamot instituted its "Hamot-Centered Physicians Program" ("HCPP"). The stated purpose of the HCPP was to promote quality and uniformity of care. Under the program, physicians were offered various benefits in exchange for focusing their practice at Hamot. (Plaintiffs' Appendix of Exhibits (hereinafter "Pls.' Ex.") 2 at pp. 7-8). According to the program's "principles of agreement," these benefits included investment opportunities, practice management support, discount malpractice insurance and consideration of a "franchise" agreement whereby Hamot agrees not to grant privileges to competing physicians.[6] (Id.)
The History of Plaintiffs' Practice at Hamot
Dr. Hanson began performing open heart surgeries at Hamot with his partner, Dr. Bruce Farrell, in 1982 after having practiced at St. Vincent Medical Center in Erie since 1971. At that time, the Clinic was the only cardiovascular surgery group at Hamot. According to Dr. Hanson, he joined Hamot's staff because two Medicor cardiologists, Dr. Charles Furr and Dr. Donald Zone, had expressed concern over the Clinic's mortality rate and wanted an alternative group of cardiovascular surgeons to whom to refer their patients.
Drs. Hanson and Farrell quickly established a successful practice at Hamot. Their group routinely received referrals from several Medicor cardiologists and their practice grew. In 1982, Drs. Hanson and Farrell performed 50 open heart surgeries at Hamot. In 1983 they performed 96 open heart surgeries. In 1984, Hamot lifted its moratorium on credentialling new cardiovascular surgeons so that Drs. Hanson and Farrell could recruit a third surgeon, Dr. Richard Cunningham, to join their practice. With the addition of Dr. Cunningham, the team's practice continued to grow. In 1984, the group performed 123 open heart surgeries at Hamot.
Dr. Hanson's group was reduced to two surgeons in early 1985 when Dr. Farrell died. The group's volume declined. In 1985 and 1986, the group performed 112 and 101 open heart surgeries respectively. In 1987, Hamot again lifted its moratorium on granting *696 new cardiovascular privileges so that Drs. Hanson and Cunningham could recruit Dr. John Forman. Dr. Forman joined the team in late 1987.[7] In 1988, the group's volume increased to 119 open heart surgeries.
However, despite Dr. Hanson's group's collective volume, Dr. Hanson individually was not meeting Hamot's volume requirement.[8] On December 12, 1988, Hamot notified Dr. Hanson of its concern about his ability to satisfy the criteria and that his future activity would be scrutinized.
The following year marked the beginning of a precipitous decline in the number of open heart surgeries performed by Dr. Hanson's group at Hamot. Drs. Cunningham and Forman resigned and left Erie, leaving Dr. Hanson alone in practice. Dr. Hanson's practice suffered because he was left without a partner who could provide consistent assistance. In response, Hamot again lifted its moratorium on granting new cardiovascular surgical privileges so that Dr. Hanson could recruit a new partner. Dr. Hanson first recruited Dr. Thomas Comer. For a variety of reasons, Dr. Comer did not fare well at Hamot and left after only four months. Dr. Hanson then recruited Dr. Kerth.
Dr. Kerth had started his career at Pacific Medical Center ("PMC") in San Francisco, where he practiced from 1962 to 1980. Dr. Kerth stated that while at PMC he performed over 100 surgeries per year and had published over ninety papers on open heart surgery. In 1980, Dr. Kerth left the United States to practice at King Faisal Specialist Hospital in Saudi Arabia. He did not perform any open heart surgeries while in Saudi Arabia. In 1983, Dr. Kerth returned to the United States and unsuccessfully tried to obtain privileges in Nebraska and at PMC. Ultimately, in late 1987, Dr. Kerth obtained limited privileges at Phoenix Baptist, Scottsdale Memorial and Good Samaritan hospitals in Arizona as part of a fellowship in cardiovascular surgery where he underwent retraining in open heart surgery. He worked in Arizona until contacted by Dr. Hanson.
After he was contacted by Dr. Hanson, Dr. Kerth visited Erie. He met with the Medicor cardiologists as part of his trip to Erie. According to Dr. Kerth, with the exception of Drs. Underhill and Sharma who told him they referred only to the Clinic, each Medicor cardiologists with whom he met was positive about his arrival at Hamot and created the expectation he would receive substantial referrals. (Kerth Dep. 125, 137, 475.) The arrival of Dr. Kerth in late 1989, however, did not increase the number of referrals to Dr. Hanson's group.
In December 1989, Hamot again notified Dr. Hanson of its concern about his continuing failure to meet the volume requirement.[9] Instead of terminating Dr. Hanson's privileges, Hamot informed Dr. Hanson he would need to perform at least 50 open heart surgeries in the first six months of 1990 or his privileges would lapse. Dr. Hanson did not receive enough referrals to meet this requirement and his privileges were terminated in July 1990.[10] The termination of Dr. Hanson's privileges left Dr. Kerth without a partner and his open heart surgery practice ground to a virtual halt.
In January 1991, at the request of Dr. Hanson and Dr. James Pepicello, Hamot's then Chief of Surgery, Hamot's Board replaced the volume requirement with a quality assurance program. The Board then reinstated Dr. Hanson's privileges, subject to the new criteria. While this arrangement enabled Dr. Hanson to begin operating again, it did not resolve the underlying lack of referrals to his group. In fact, throughout 1991 the number of referrals to Dr. Hanson's group further declined. In 1991, Drs. Hanson and Kerth performed only 13 open heart surgeries at Hamot.
*697 In mid 1992, Hamot notified Drs. Hanson and Kerth that their surgery volume had become so low that it was no longer possible to conduct a statistically meaningful evaluation of the quality of care they were providing. The Board voted to reinstate the volume requirement. Dr. Hanson's privileges were revoked in mid 1992. Dr. Kerth's privileges were revoked in the following year.[11]
The instant civil action followed. Plaintiffs filed a six count complaint on August 11, 1995.[12] In Counts I, II and III, Plaintiffs allege the Defendants violated section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to (1) boycott, (2) reciprocally deal and (3) exclusively deal in open heart surgery referrals. In Count IV, Plaintiffs claim the Clinic Defendants violated section 2 of the Sherman Act, 15 U.S.C. § 2, by attempting to monopolize the market for open heart surgery in Erie. In Counts V and VI, Plaintiffs allege pendant state law antitrust and tortious interference with prospective business relations claims based on the same conduct allegedly giving rise to the Sherman Act violations.
II. STANDARD OF REVIEW
A movant is entitled to summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." Fed.R.Civ.P. 56(c). This rule allows parties to demonstrate prior to trial that opposing claims "have no factual basis." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The inquiry here is "whether there is any need for a trial whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may be reasonably resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
The moving party has the initial burden of demonstrating that no genuine issue of material fact exists. Celotex, 477 U.S. at 323. Thereafter, the burden shifts to the nonmoving party to demonstrate that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 324. All inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 8 L. Ed. 2d 176 (1962).
III. DISCUSSION
1. The Section 1 Claims
Counts I, II and III of Plaintiffs' complaint are premised on section 1 of the Sherman Act which provides:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.
15 U.S.C. § 1.
"To establish a section 1 violation, a plaintiff must prove: (1) concerted action by the defendants; (2) that produced anticompetitive effects within the relevant product and geographic markets; (3) that the concerted actions were illegal; and (4) that it was injured as a proximate result of the concerted action." Mathews v. Lancaster General Hosp., 87 F.3d 624, 639 (3d Cir.1996) (citing Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1229 (3d Cir.1993), cert. denied sub nom., Moyer Packing Co. v. Petruzzi's IGA Supermarkets, Inc., 510 U.S. 994, 114 S. Ct. 554, 126 L. Ed. 2d 455 (1993)). We have bifurcated discovery on the "concerted action" and "relevant market" elements. Thus, at this point, we are only concerned with proof of whether the *698 Defendants participated in any illegal concerted action.
"Concerted action" is a "collective reference to the contract combination or conspiracy." Mathews, 87 F.3d at 639 (citing Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1131 (3d Cir.1995)). It requires "a unity of purpose or a common design and understanding or meeting of the minds in an unlawful arrangement." Id. (citations omitted) "Unilateral action, no matter what its motivation, cannot violate [section] 1." Id. (citing Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 110 (3d Cir.1980), cert. denied, 451 U.S. 911, 101 S. Ct. 1981, 68 L. Ed. 2d 300 (1981)). A plaintiff's evidence must tend to exclude the possibility that the defendants were acting independently. Monsato Co. v. Spray Rite Service Corp., 465 U.S. 752, 764, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984).
Additionally, a plaintiff's theory of concerted action must be economically plausible. "[I]f the [plaintiff's] claim is one that simply makes no economic sense [the plaintiff] must come forward with more persuasive evidence to support [its] claim than would otherwise be necessary." Matsushita Elec. Industrial Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). In such an instance, an inference of concerted action is not reasonable unless the plaintiff's evidence is "sufficiently unambiguous to permit a trier of fact to find that (the defendants) conspired ... despite the absence of any apparent motive to do so." Matsushita, 475 U.S. at 597.
Plaintiffs' Conspiracy Theory
Plaintiffs claim the conspiracy in this case was born of the Clinic's anticompetitive goal of becoming the exclusive provider of cardiovascular surgery at Hamot. To achieve its goal, the Clinic allegedly economically coerced Medicor and Hamot into participating in a scheme designed to destroy Plaintiffs' practice by depriving them of referrals. Medicor's role in the conspiracy was to refer exclusively to the Clinic. Hamot's role in the conspiracy was (1) to use its economic influence over Medicor to ensure that Medicor faithfully referred only to the Clinic, and (2) to ensure the success of the conspiracy by creating an atmosphere at Hamot in which Medicor's failure to refer cases to Plaintiffs would ultimately drive Plaintiffs out of business.[13] Notably, however, the allegations of wrongdoing levied against Hamot do not extend to Hamot's revocation of Plaintiffs' privileges. Plaintiffs have explicitly stated that they
do not challenge any particular professional review action relating to their loss of privileges. Rather, they challenge the anti-competitive activities that led to the destruction of Dr. Hanson's medical practice and that led to the inability of Dr. Kerth to establish a viable practice in Erie.
(Amended Complaint at ¶ 54.)[14]
According to Plaintiffs, the first overt act in furtherance of the alleged conspiracy was a December 1989 Physicians' Staffing Committee meeting, held one day after Dr. Kerth's arrival at Hamot, in which one of the items on the agenda was a discussion of whether Hamot really "need[s] one or two groups of CV [cardiovascular] Surgeons." (Oral Arg. Tr. at 78-79; Pls.' Ex. 9).
Defendants raise a two-part argument in support of their motions for summary judgment on the section 1 counts:[15] (1) that *699 Plaintiffs' theory of the conspiracy is implausible because neither Hamot nor Medicor had a rational motive to join in such a conspiracy and (2) that the Plaintiffs have not produced evidence excluding the possibility that the Medicor cardiologists made referral decisions based on independent medical judgment. Before addressing this argument, we again emphasize that our inquiry is framed by the nature of the alleged conspiracy in this case, which is an agreement to deprive the Plaintiffs of referrals. The source of those referrals are the Medicor cardiologists. The Medicor cardiologists had only two referral options at Hamot for open heart surgery the Plaintiffs or the Clinic. Thus, our focus is properly on whether there is a material issue of fact concerning whether the Medicor cardiologists were not referring to Plaintiffs because of a reciprocal or exclusive referral agreement that was foisted upon them by coercive pressure from the Clinic and/or Hamot. As discussed below, the existence of such an agreement is not only economically implausible, it is also unsupported by the record.
A. Economic Motive
Defendants argue the putative conspiracy is unreasonable under the holding of Matsushita, supra, because Plaintiffs have not presented a coherent explanation of what either Hamot or Medicor stood to gain by helping the Clinic destroy Plaintiffs' practice.[16] In Matsushita, American makers of television sets alleged that Japanese electronics manufacturers had conspired to drive them out of business by fixing prices below market levels and that they had financed this strategy with monopoly profits earned in the Japanese market. Matsushita, 475 U.S. at 578. The district court granted summary judgment in favor of the defendants. Id. at 579. The Third Circuit reversed the district court and the defendants appealed.
On appeal, the Supreme Court concluded that the Third Circuit had not adequately addressed whether the defendants had a plausible motive to engage in the alleged conspiracy. In reaching this conclusion, the Supreme Court first pointed out that predatory pricing conspiracies are speculative, rarely tried and even more rarely successful because they require the conspirators to forgo profits in hopes of recouping their losses after the conspiracy is successful. Id. at 588-89. Next, the Court observed that the alleged conspiracy was twenty years old and still far from achieving its alleged goal. Id. at 591. Third, the Court looked at the market and determined there was no evidence that the defendants, even if successful, could realistically hope to recoup the losses they had suffered pursuing their alleged goal.[17]Id. Thus, the Court concluded that the record, if anything, suggested the defendants "had every incentive not to engage in the conduct with which they [were] charged." Id. at 595.
The Court went on to hold that the defendants' lack of an economically plausible motive to enter into the alleged conspiracy limited the range of inferences that could be drawn in favor of the plaintiffs because allowing mistaken inferences from ambiguous evidence would chill legitimate procompetitive behavior. Id. The Court also observed that much of the evidence of "concerted action" in the case was ambiguous and equally as consistent with a legitimate procompetitive motive as it was with an anticompetitive one. Id. at 596-97. Thus, the Supreme Court remanded the case to the Third Circuit for consideration of whether the plaintiffs had produced "sufficiently unambiguous" evidence that the defendants conspired "despite *700 the absence of any apparent motive to do so." Id. at 597-98.
The application of Matsushita to motions for summary judgment was addressed by the Third Circuit in Petruzzi's IGA v. Darling-Delaware, 998 F.2d 1224 (3d Cir.1993). The Third Circuit, focusing on the attendant concerns raised by the Matsushita Court, observed that Matsushita did not create a new summary judgment standard in section 1 Sherman Act cases, but rather limited the permissible scope of liberal inferences which could be drawn from ambiguous evidence when: (1) the plaintiff's conspiracy theory was economically implausible and (2) permitting an inference of antitrust conspiracy under the circumstances would have the effect of deterring significant procompetitive conduct. Petruzzi's IGA, 998 F.2d at 1232. The Third Circuit further pointed out that the "Matsushita Court did not hold that an antitrust defendant is entitled to summary judgment merely by providing an economic theory to justify its behavior." Id. at 1231. See, also, Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 468, 112 S. Ct. 2072, 119 L. Ed. 2d 265 (1992). Thus, when Matsushita applies, the proper inquiry is not whether a defendant can plausibly explain its behavior, but rather whether there is sufficient evidence that reasonably supports the inference that a defendant acted contrary to rational economic self interest.
Hamot's Alleged Motive
Hamot argues that Plaintiffs have not presented a plausible explanation of its economic motive to join the alleged conspiracy. Hamot points out that it did not compete with Plaintiffs because it did not employ cardiovascular surgeons. Quite to the contrary, Hamot argues it derived revenue from surgeries performed by the Plaintiffs and that, consistent with this interest, it repeatedly granted Dr. Hanson exceptions to its credentialling moratorium and its volume requirement in order to permit him to revive his practice; and that it took adverse action only after Dr. Hanson's group's surgical volume had become so low that Hamot could no longer meaningfully evaluate the quality of care his group was providing.
Plaintiffs argue the instant situation is analogous to number of cases in which a hospital conspired against physicians who practiced at the hospital. See Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U.S. 2, 5, 104 S. Ct. 1551, 80 L. Ed. 2d 2 (1983) (anesthesiologist was denied privileges because the hospital had already entered into an express exclusive contract with his competitors); Betkerur v. Aultman Hosp. Ass'n., 78 F.3d 1079, 1083 (6th Cir.1996) (hospital dissolved a "Cross-Coverage" policy under which OB/GYNs were required to refer to the Neonatologist "on-call" at the time, freeing physicians to engage in exclusionary referral practices directed at the plaintiff); Key Enterprises of Delaware, Inc. v. Venice Hospital, 919 F.2d 1550, 1554 (11th Cir.1990) (hospital instituted an official policy of referring patients to a particular vendor of durable medical equipment with whom the hospital had entered into a joint venture), cert. denied sub nom., Sammett Corp. v. Key Enterprises of Delaware, Inc., 511 U.S. 1126, 114 S. Ct. 2132, 128 L. Ed. 2d 863 (1994).
These cases are not analogous to the situation presented here. Jefferson Parish Hospital and Key Enterprises of Delaware involved express agreements between the hospital and the plaintiffs' competitors which provided an obvious economic incentive for the hospital to exclude the plaintiffs from the market. The unique facts in Betkerur empowered the hospital to exercise direct control over referral patterns. Here, Plaintiffs have not produced an express exclusive agreement between Hamot and the Clinic. Nor have they produced any evidence that Hamot had direct control over Medicor's referral patterns. Rather, Plaintiffs theory is that Hamot was covertly pressuring Medicor to refer exclusively to the Clinic because Dr. D'Angelo was threatening to move his large income generating practice to another hospital if the Clinic was not made the exclusive provider of cardiovascular surgery at Hamot. According to Plaintiffs, Dr. D'Angelo's threats put Hamot in an "catch 22" situation, forcing it to join the conspiracy and sacrifice the relatively small amount of revenue generated by the Plaintiffs in order to ensure it maintained a stable relationship with the Clinic. Plaintiffs contend that Hamot *701 capitulated to Dr. D'Angelo's threats and took the official position that it would be easier for the hospital to market and control one cardiovascular surgery group rather than two.
In this respect, Plaintiffs reliance on Boczar v. Manatee Hospitals & Health Systems, Inc., 993 F.2d 1514, 1519 (11th Cir. 1993) and Oltz v. St. Peter's Community Hospital, 656 F. Supp. 760, 762-764 (D.Mont. 1987), aff'd, 861 F.2d 1440 (9th Cir.1988) is more appropriate. These cases stand for the principal that physicians' threats to leave a hospital can provide the hospital with an economic motive to conspire against the physicians' competitors. Notwithstanding the merits of this economic theory, it does not apply here because Plaintiffs have produced no evidence from which it could reasonably be inferred that Hamot's actions were motivated by such concerns.
The evidence cited by Plaintiffs consists of: (1) evidence that Dr. D'Angelo wanted the Clinic to be the exclusive provider of cardiovascular surgery at Hamot,[18] (2) evidence that Dr. D'Angelo was popular, regarded as influential and generated significant revenue for Hamot, (3) testimony that Dr. D'Angelo had, on several occasions, threatened to move patients from Hamot over quality of care issues,[19] and (4) the fact that one of the items on the agenda for the December 1989 Physicians Staffing Committee meeting was a discussion of whether Hamot "need[s] one or two groups of [cardiovascular] surgeons."[20]
There is no evidence reasonably supporting the inference of a causal connection between Dr. D'Angelo's desire to have "exclusive" status at Hamot and Hamot's consideration of its cardiovascular surgery staffing needs. There is simply no evidence that Dr. D'Angelo actually threatened to move the Clinic if the Clinic was not granted exclusive status. There is no evidence that a Board member or a member of Hamot's Administrative Staff feared such a move. Moreover, it would be wholly speculative to infer that such undocumented threats motivated Hamot to take action based on the fact that Dr. D'Angelo was influential, popular or generated money, or from the fact that Dr. D'Angelo may have threatened to move patients over collateral issues.
Alternatively, Plaintiffs suggest Hamot had a motive to destroy their practice because it perceived Dr. Hanson as a threat to the success of a collateral conspiracy to block the entry of managed care, which paid lower fees for hospital services, into the health care market in Erie. In support of this contention, Plaintiffs claim Hamot was a participant in a collateral conspiracy (along with other hospitals and physicians in Erie) to boycott health maintenance organizations ("HMOs"). According to Plaintiffs, Dr. Hanson was a maverick who threatened the success of this boycott by maintaining privileges at two hospitals. Supposedly, Dr. Hanson's dual privileges would make it possible for HMOs to get Hamot and St. Vincent's to bid against one another for surgical facilities without requiring patients to change their cardiovascular surgeon.
Plaintiffs' collateral conspiracy theory is also not supported by the record. The evidence of this collateral conspiracy consists of an affidavit from Geraldine Zurn, the former president of Independent Health ("IH"), an HMO in Buffalo, New York and a draft of Hamot's Physician Staffing Plan. Ms. Zurn states that IH was not able to establish itself in Erie because it could not succeed in recruiting specialists. The plan draft, which Plaintiffs characterize as a "remarkable document," discusses increased competition in the health care industry due to "excess capacity" and indicates Hamot should work with its staff to remain competitive by controlling the supply of physicians and encouraging physicians to practice exclusively at *702 Hamot. This evidence does not reasonably support the existence of a collateral conspiracy to block the entry of managed care in the Erie health care market. It follows, of course, that if there is insufficient evidence that such a conspiracy existed, such a conspiracy could not provide a motive for Hamot to conspire against Plaintiffs.
Finally, as Hamot correctly points out, Plaintiffs' theory of Hamot's participation in the conspiracy is implausible in light of the record. If Hamot desired to eliminate Dr. Hanson's practice, it could have done so in 1989 by refusing to lift its moratorium on credentialling new surgeons so that Dr. Hanson could not recruit a new partner and terminating his privileges based on his failure to meet the volume requirement. Such a peer review action would have enjoyed a presumption of immunity under the HCQIA. See Mathews, 87 F.3d at 633; note 14 supra. Yet, the record demonstrates that Hamot did exactly the opposite. Beginning in December 1988, Hamot repeatedly granted Dr. Hanson numerous exceptions to the volume requirement and permitted him to recruit Dr. Comer and then Dr. Kerth. Additionally, after initially taking action against Dr. Hanson in 1990 based on the volume requirement, Hamot abandoned the volume requirement at Dr. Hanson's request and permitted him to regain his privileges. Only after his group's annual surgical volume had fallen into the teens did Hamot reinstate the volume requirement and terminate Dr. Hanson's privileges. Plaintiffs have presented no plausible explanation for why Hamot would engage in this course of conduct while simultaneously participating in a clandestine campaign to destroy their practice by pressuring Medicor to reduce the number of referrals it was providing to Dr. Hanson's group.[21]
Medicor's Motive
Medicor also argues that it had no economic motive to join the alleged conspiracy. Medicor points out that it has no economic interest in affecting the number of cardiovascular surgeons at Hamot because none of its employees perform open heart surgeries. Rather, the cardiologists refer every heart patient who needs surgery to a cardiovascular surgeon who has no economic connection to Medicor. If anything, Medicor argues, there is a basic market incentive for its cardiologists to refer patients to a surgeon who they believe will provide the best care because the success of the surgery will reflect on the soundness of the cardiologist's medical judgment in making the referral.
Plaintiffs suggest Medicor had an economic incentive to join the conspiracy because Hamot and the Clinic were both threatening to disrupt the success of its practice if it refused to refer exclusively to the Clinic. Hamot was supposedly applying economic pressure on Medicor by threatening to grant privileges to competing cardiologists if Medicor did not refer exclusively to the Clinic. The Clinic was supposedly applying economic pressure by threatening not to make reciprocal referrals to Medicor. Neither of these contentions is supported by the record. We will address each one in turn.
Plaintiffs give the following explanation of the alleged coercive pressure being applied to Medicor by Hamot:
Here, Hamot's and Medicor's participation in an exclusion not otherwise advantageous to them, was economically beneficial to them because of [Dr.] D'Angelo's ability to play on the interdependence among the defendants Hamot's dependence on D'Angelo, and Medicor's dependence on D'Angelo and its exclusive "franchise" from Hamot.
(Pls.' Br. at 62.) According to Plaintiffs, Dr. D'Angelo was able to "play" on the economic "interdependence" of Hamot and Medicor in the following manner: Dr. D'Angelo exerted coercive economic influence over Hamot by threatening to move the Clinic's practice to another hospital. This was done to coerce Hamot into pressuring Medicor to refer exclusively to the Clinic. Hamot had influence over Medicor because Hamot had granted Medicore a quasi-exclusive "franchise," in return for which Medicor promised to admit its patients exclusively to Hamot. At the same *703 time, Medicor was also under coercive pressure from a reciprocal/exclusive referral agreement with the Clinic, under which Medicor would lose some portion of its revenue if it did not refer exclusively to the Clinic. This theory is both unsupported by the record and theoretically self defeating.
The theory is unsupported by the record because Plaintiffs have produced no evidence from which it could reasonably be inferred that Hamot ever threatened to grant privileges to a competing group of cardiologists if Medicor did not refer exclusively to the Clinic. Plaintiffs' evidence supporting this theory consists of an alleged statement made by Dr. Charles Furr, a senior Medicor cardiologist and member of Hamot's Board, to Dr. Kerth indicating he was not referring cases to Dr. Kerth because "Hamot's Board only wanted one cardiac surgery group." (Kerth Dep. at 178.) This statement does not support the reasonable inference that Medicor was capitulating to threats from Hamot's Board. In fact, Dr. Kerth acknowledged there was no evidence that such threats were ever made, but simply speculated about how "it's conceivable that this may have crossed someone's mind at one time" and "it's within the realm of possibility." (Kerth Dep. at 742-743.)
Additionally, the idea that Hamot was pressuring Medicor to refer exclusively to the Clinic because the Clinic was threatening to move to another hospital is theoretically self defeating in light of fact that Plaintiffs have also alleged Medicor had an exclusive agreement with Hamot. Under such a scenario, if the Clinic were to move to a competing hospital, the Clinic would loose its referrals from Medicor because Medicor would have to honor its exclusive agreement with Hamot by referring its open heart surgery patients to surgeons who practiced at Hamot. Ironically, the consequences of such a scenario would be a likely increase in the number of referrals to the Plaintiffs, who would, at least temporarily, be the only open heart surgery referral option at Hamot.
Plaintiffs also contend that Medicor was referring exclusively to the Clinic out of fear of loosing reciprocal referrals. Plaintiffs claim that unique referral patterns existed in Erie which permitted the Clinic to exert economic pressure on Medicor. According to Plaintiffs, in Erie, a substantial portion of heart patients were referred by their primary care physician directly to the Clinic, rather than to a cardiologist. The Clinic would then refer such heart patients to Medicor for testing and evaluation prior to undergoing surgery. Plaintiffs allege Medicor received twenty percent of its patients from the Clinic in this fashion, giving the Clinic considerable economic influence over Medicor.
The evidence adduced suggests that at the time of the events in question, such referrals actually accounted for approximately five percent of Medicor's business. (Furr. Dep. 201; Ferraro Dep. 138-40). Moreover, there appears to have been little incentive for any individual cardiologist to act out of fear of loosing such referrals because the Medicor cardiologists are not compensated based on individual productivity. Rather, associates are paid a flat salary and partners receive an equal share of the equity irrespective of their productivity. This compensation structure is of particular importance because the deposition testimony of Dr. Demjanenko, relied on by Plaintiffs to establish that some Medicor cardiologists felt pressure to refer to the Clinic, also indicates that if one Medicor cardiologist lost referrals from the Clinic, those referrals would likely go to a different Medicor cardiologist.[22] (Demjanenko Dep. at 13-14.)
More importantly, however, there is nothing in the record suggesting that a coercive reciprocal agreement actually existed. Plaintiffs acknowledge they can not produce an express agreement. Rather, Plaintiffs point to a number of statements which they claim confirm the existence of "an implicit agreement ... between Medicor and the Clinic to restrict referrals among themselves and limit referrals to [P]laintiffs." (Pls.' Opp. Br. at 9.) These statements were supposedly made *704 to the Plaintiffs in 1989 when they went searching for an explanation for the sudden drop in their referrals. The statements consist of Dr. Kerth's deposition testimony concerning conversations he had with Medicor cardiologists Dr. Paul Demjanenko and Dr. Francis Nullet (Kerth Dep. at 631, 636) and an inadmissible hearsay statement allegedly made by a Medicor secretary named "Eve" (Dombrowski Aff.).
According to Dr. Kerth, Dr. Demjanenko explained that he only referred to the Clinic because,
he feared referring cases to Hanson and Kerth because he feared that if he referred patients to Hanson and Kerth they would make D'Angelo unhappy, and he feared that he may not get referrals from Dr. D'Angelo in return.
(Kerth Dep. at 740.) Dr. Nullet allegedly told Dr. Kerth that
it was difficult for young cardiologists to refer cases outside the D'Angelo group.
(Kerth Dep. 199-200.)
These statements do not reasonably support the inference of a reciprocal referral agreement. The statements are equally as consistent with an inference that the cardiologists were acting out of a unilateral desire to obtain Dr. D'Angelo's return business as they are with the inference that the cardiologists were acting pursuant to an agreement. A unilateral choice to do business with another in hopes of maintaining that person's return business is an everyday occurrence and is purely independent action.
The "Eve" statement was made to Dr. Hanson's secretary during a lunch date. Eve supposedly indicated that Medicor dealt "exclusively" with the Clinic and that the offices of Medicor and the Clinic had "combined." (See Dombrowski Aff.) Since Plaintiffs have not adequately qualified this statement as a hearsay exclusion under Fed. R.Evid. 801(d)(2), we will not consider it in opposition to Defendants' motions for summary judgment.[23]Hlinka v. Bethlehem Steel Corp., 863 F.2d 279, 282 (1988).
The Attendant Concerns of Matsushita
As the Third Circuit has explained, the attendant concerns of Matsushita are implicated when (1) the plaintiff's conspiracy theory is economically implausible and (2) permitting an erroneous inference of antitrust conspiracy under the circumstances would have the effect of deterring significant procompetitive conduct. Petruzzi's IGA, 998 F.2d at 1232. Both concerns are implicated here.
As discussed above, Plaintiffs' attempts to explain why Hamot and Medicor would ignore market forces and join the alleged conspiracy rely on unsupported speculation concerning threats and economic coercion. Moreover, permitting an erroneous inference of antitrust conspiracy under the facts of this case would not only deter significant procompetitive conduct, it would "pose grave and unusual dangers to the proper administration of health care." Pontius, 552 F.Supp. at 1362. Undoubtedly, there is a strong public interest in encouraging physicians to use their best judgment when making referrals and in encouraging hospitals to maintain quality of care by regulating physicians. It would pose a grave threat to these interests if physicians and hospitals, exercising these important functions, were forced to weigh patient care against the prospect of incurring antitrust liability based on unsupported, speculative allegations that their actions were the product of coercive conspiracies with surgeons who happened to fare better under such a system.
B. Contract, Combination or Conspiracy
Even when a plaintiff's conspiracy theory is plausible, antitrust law limits the inferences that can be drawn from ambiguous conduct. Monsanto, 465 U.S. at 763-64. A plaintiff must reasonably exclude the possibility that the defendants acted independently. Id. at 764. When a plaintiff's conspiracy *705 theory does not make economic sense, a plaintiff must produce more persuasive evidence to support their claim than would otherwise be necessary. Matsushita, 475 U.S. at 587. The conspiracy in this case is contrary to the rational economic self-interest of both Hamot and Medicor. Plaintiffs' attempts to explain how the conspiracy enured to their benefit is unsupported by the evidence. Thus, we are left to consider whether sufficient unambiguous evidence has been adduced which would permit an inference that the alleged conspiracy actually existed.
Plaintiffs' efforts to establish the existence of the alleged implicit agreement is threefold. First, Plaintiffs rely on the motive evidence which has been discussed and rejected in the preceding subsection of this opinion. Second, Plaintiffs argue such an agreement can be inferred from the fact that Medicor can not adequately explain its referral patterns in terms of medical judgment. Third, Plaintiffs argue such an agreement can be inferred from various policies implemented by Hamot which demonstrate a commitment to the destruction of Plaintiffs' practice.
Plaintiffs' Surgical Competence
Plaintiffs argue a reasonable factfinder could infer that Medicor's referral patterns were the product of a conspiracy from the fact that the Medicor cardiologists stopped referring to Dr. Hanson's group without a compelling "quality of care" justification. Contrary to Plaintiffs' contentions, concerted action in furtherance of an illegal conspiracy can not be inferred from Medicor's failure to "demonstrate a marked disparity between [P]laintiffs' and the Clinic's competence." (Pls.' Surreply Brief at 5 (emphasis supplied)).
A similar argument was addressed and rejected by the Eighth Circuit in Willman v. Heartland Hospital East, 34 F.3d 605 (8th Cir.1994), cert. denied, 514 U.S. 1018, 115 S. Ct. 1361, 131 L. Ed. 2d 218 (1995). Willman involved the termination of a surgeon's staff privileges. Willman, 34 F.3d at 607. The surgeon sued the hospital and physicians involved in the peer review action claiming, among other things, that the defendants conspired to terminate his staff privileges in violation of section 1 of the Sherman Act. Id. at 609. The plaintiff argued he could demonstrate the peer review proceedings were a "sham" and that his privileges were actually terminated for the unlawful purpose of preventing him from competing with the defendants by adducing evidence that created a genuine issue as to whether the peer reviewers had reached the wrong result and removed a qualified physician. Id. at 610. The Eighth Circuit held that such evidence, even if capable of showing the plaintiff was competent, could not create a material issue of fact concerning whether the defendants had conspired in pursuit of an unlawful objective. Id. (citing American Tobacco Co. v. United States, 328 U.S. 781, 810, 66 S. Ct. 1125, 90 L. Ed. 1575 (1946) (arrangement must be for an unlawful purpose) and Lie v. St. Joseph Hosp., 964 F.2d 567, 570 (6th Cir.1992) (monitoring competence through peer review is lawful and in the public interest)). The court observed that
whether [plaintiff] actually provided substandard care is not the proper question. Rather, we must decide whether [plaintiff's] peer reviewers could have reasonably concluded that he provided substandard care.
Id. at 611.
We think this rationale applies with equal force to the referral practice being challenged here. Making referrals based on medical judgment is not only a lawful objective, it is also strongly in the public interest. Referring physicians must be accorded considerable latitude to make referrals based on their patients' best interests.
The issue here is not whether the Plaintiffs were in fact competent, but rather whether the Medicor cardiologists were justified in believing that their patients would be in better hands if they were referred to a member of the Clinic. In this respect, the Plaintiffs can successfully raise the reasonable inference that the Medicor cardiologists were referring in furtherance of an unlawful purpose only by demonstrating that no reasonable medical justification existed for their referral practice. As in Willman, Plaintiffs have not met this standard. Plaintiffs have merely succeeded in creating a material issue of fact *706 concerning whether they were technically competent. However, as this Court has observed, technical competence is not the only factor to considered when making medical referrals. See Robinson v. Magovern, 521 F. Supp. 842, 890 (W.D.Pa.1981) (observing that referrals are based on ability, availability and affability).
Additionally, while this Court has recognized that referral patterns developed over time tend to be more stable, Robinson, 521 F.Supp. at 890, the continued stability of such patterns obviously depends upon an ongoing level of comfort with the surgeon(s) to whom cases are being referred. In this respect, Dr. Hanson, after losing his partners and being forced to recruit new ones, was not automatically entitled to continue receiving referrals from Medicor simply because he may have received them in the past. Additionally, Dr. Kerth, as a new surgeon, was not entitled to immediate and substantial referrals upon entry into a market in which referral patterns to the Clinic already existed. Id. at 891.
The record is replete with evidence, including deposition testimony and affidavits, supporting the idea that the Medicor cardiologists lost confidence in Dr. Hanson's practice when his partners, Drs. Forman and Cunningham, left Erie. As Dr. Hanson himself explained:
Well, I think that a change in practice where you go from a two man practice to a one man practice and there is a long hiatus where cases can't be referred because there is no assistant, and a negative impact on a practice, and I think once a practice is reestablished, as it was with Dr. Kerth, that practice needs time to rebuild.
(Hanson Dep. 424).
Medicor cardiologists have further explained that prior to 1989 they considered Dr. Hanson's practice stable and were comfortable referring patients to him because he had strong partners. This comfort level was disrupted when Drs. Forman and Cunningham left Erie. Additionally, Dr. Hanson was without a partner for a significant period of time in 1989. During 1989, the Medicor cardiologists began referring an increasing number of their patients to the Clinic.[24] The cardiologists were happy with the results they received from the Clinic. When Dr. Hanson recruited Dr. Kerth, the Medicor cardiologists did not regain their previous level of comfort with his group. They had legitimate concerns about Dr. Kerth's lengthy absence from the practice of open heart surgery. Consequently, Dr. Hanson's group was not able to "reestablish" itself and the cardiologists simply saw no reason to refer cases there at all when the Clinic was providing satisfactory care. Because the undisputed record is consistent with this explanation, it would be unreasonable to conclude that the Medicor cardiologists' referral practices were devoid of medical justification. As such, the change in Medicor's referral patterns can not support an inference of an illegal conspiracy.
Hamot's Policies
Plaintiffs also claim that a conspiracy can be inferred from various staffing policies and marketing efforts undertaken by Hamot. We address each of these initiatives according to the categories used by Plaintiffs.
i. The First Assistant Rule & Volume Requirement
Plaintiffs claim a conspiracy can be inferred from Hamot's first assistant rule and its open heart surgery volume requirement. First, we point out that these rules regulate the practice of cardiovascular surgery, not cardiology, and thus have nothing to do with whether Plaintiffs received referrals from Medicor. Nevertheless, Plaintiffs claim that these rules were used (or misused) by Hamot to "get them" and to "facilitate" the destruction of their practice.
Temporally, Plaintiffs' claims are implausible because the rules were adopted in 1984, some five years prior to the alleged conspiracy and at a time when Dr. Hanson's practice was growing. There is no evidence that the Clinic was involved in the adoption of these *707 rules; or even that the Board's implementation of these rules was motivated by anything other than a concern for quality of care.
There is no evidence supporting Plaintiffs' claim that the first assistant rule was adopted because of the onerous effect it would have on small practices that competed with the Clinic. The evidence adduced by Plaintiffs in support of this contention consists of deposition testimony by Dr. Marshall, a former Clinic surgeon, who indicated Dr. D'Angelo told him he liked the rule because
number one, it allows us to charge a first assistant's fee, which generates more money. And, number two, it keeps competition away.
(Marshall Dep. at 36.) Plaintiffs also cite to their own deposition testimony containing their belief that the Clinic had a policy of refusing to assist them in non-emergency situations. Dr. Kerth stated he believed such a policy existed based on "what [he] understood from Hanson." (Kerth Dep. 658.) Dr. Hanson testified he believed such a policy existed because Dr. Tan and Dr. Kish had refused to assist him on two occasions.[25] (Hanson Dep. 480-91.) According to Dr. Hanson, when he asked Dr. Kish why he would not provide assistance, Dr. Kish said Dr. D'Angelo would not permit him to assist the competition. (Id. at 483.)
This evidence, when taken as true, focuses entirely on the independent conduct of the Clinic Defendants. The evidence goes to whether the Clinic took advantage of the rule's incidental effects on their practice, not to whether Hamot adopted it in order to destroy their practice. Irrespective of any probative value this evidence may have concerning the conduct of the Clinic, it does nothing to exclude the possibility that Hamot acted independently when it enacted the rule; and that Hamot did so out of a good faith belief that the rule was in the interest of quality of care.
Plaintiffs also claim there is evidence that Hamot selectively enforced the volume requirement to eliminate Dr. D'Angelo's competition. As evidence, Plaintiffs cite to the fact that Dr. Sherafat, a surgeon who was fired from the Clinic and attempted to practice on his own at Hamot, lost his privileges under the auspices of the volume requirement while no action was taken against Dr. Kish (a member of the Clinic) when he did not meet the volume requirement. For a variety of reasons, this evidence does not demonstrate selective enforcement against the Clinic's competition.
Plaintiffs have produced no evidence that any member of the Clinic was involved in the termination of Dr. Sherafat's privileges.[26] As for Dr. Kish, the record demonstrates that he in fact never actually failed to meet the volume requirement. While Dr. Kish did not perform twenty five procedures as the primary surgeon between July 1984 and July 1985, he was subject to a grandfather clause under which existing surgeons were given until November 1986 to comply with the criteria. More importantly, however, the very idea that the volume requirement was selectively enforced against the Plaintiffs' practice is belied by the uncontradicted record. As discussed in detail earlier, Dr. Hanson was repeatedly granted exceptions to the volume requirement beginning in 1988. In fact, the requirement was abandoned at his request and was only reimposed when his group's surgical volume became so low that Hamot reasonably believed it could not meaningfully measure the quality of care Plaintiffs were providing.[27] No reasonable factfinder examining this evidence could conclude *708 that the volume requirement was selectively enforced against Plaintiffs' practice in furtherance of a conspiracy.
ii. The Physicians Referral Network
Hamot maintained a marketing initiative called the Physicians' Referral Network ("PRN") Part of the PRN's activities involved arranging meetings with physicians in outlying areas to educate them about services and facilities available at Hamot. The trips were organized by low level nurse liaisons at Hamot.
Plaintiffs allege that Hamot used the "PRN" to further the conspiracy by refusing to permit them to participate in these trips, thus blocking their access to alternative sources of referrals. Additionally, Dr. Kerth testified that when he approached Hamot's C.E.O., Dana Lundquist ("Lundquist"), to voice his concern about not being included in the PRN, Lundquist reportedly "chuckled" and told Dr. Kerth the only way to practice cardiovascular surgery at Hamot was to be in the D'Angelo Group. (Kerth Dep. at 204-05.) This evidence does not support the inference of a conspiracy.
Nothing in the record suggests that Plaintiffs' exclusion from these trips was anything other than unilateral action by low level employees. The uncontradicted testimony of the nurses responsible for the trips indicated they were never instructed to favor any physician or exclude another from PRN activities. (Balogna Dep. at 32.) Lundquist's statement, at best, is a factual comment on the state of referral patterns at Hamot. It does not suggest that those referral patterns are the result of concerted action.
iii. Joint Ventures
Plaintiffs also claim a conspiracy can be inferred from the fact that Plaintiffs were denied the opportunity to participate in joint ventures. Plaintiffs complain they were promised, but denied participation in a cardiac fitness center ("CFC"), a for profit cardiac rehabilitation and diagnostic facility owned by a group of investors which included Hamot, Medicor and Dr. D'Angelo. According to Plaintiffs, Dr. D'Angelo and Medicor opposed granting the Plaintiffs an opportunity to participate in the venture. None of the Defendants were under an obligation to go into business with Plaintiffs and any inference of a conspiracy from their failure to do so is unreasonable.
iv. Marketing Support
Plaintiffs also claim that a conspiracy can be inferred from the fact that the Clinic received preferential advertising treatment. The first instance of preferential marketing support cited by Plaintiffs involves the fact that Dr. D'Angelo was featured in a Hamot newspaper advertisement commemorating the 30th anniversary of the first open heart surgery performed in Erie. (Pls.Ex.16.) The second instance of preference is the fact that Plaintiffs were left out of a group photograph in the Erie & Chautauqua Magazine entitled "Hamot's team of cardiac specialists." (Pls.' Ex. 17.) The photograph was part of an advertisement commemorating the high rating Hamot physicians had received in a 1992 study performed by the Pennsylvania Health Care Cost Containment Council. (Id.) These advertisements promoted specialty services at Hamot, not the individual physicians. Dr. D'Angelo's inclusion in the newspaper advertisement is obvious; he performed the surgery. Plaintiffs exclusion from the second advertisement is likewise obvious; they had not performed enough surgeries to receive individual ratings and their surgical group, as a whole, experienced a statistically high rate of mortality.
Plaintiffs also claim that a conspiracy can be inferred from the fact that Hamot refused to partially fund Dr. Hanson's personal marketing plan. There is no evidence that Hamot funded any similar personal marketing plan for the Clinic, or for any other physicians. Additionally, the deposition testimony of Wilmer K. Calvin ("Calvin"), the consultant who developed Dr. Hanson's marketing plan, simply does not link Hamot's refusal to fund Dr. Hanson's plan to pressure from Dr. D'Angelo. Calvin concludes that Hamot's decision was the result of "pressure on Hamot ... from D'Angelo" based on "feedback" from unspecified "sources[,] ... people on staff" and "constant reports from Drs. Hanson and Cunningham." (Calvin Dep. 16-17.) There is no indication that Calvin had any *709 personal knowledge that such pressure was ever exerted. There is no basis from which to infer Hamot's decision not to spend its money on Dr. Hanson's personal marketing plan was anything other than a manifestation of business judgment.
2. The Section 2 Claims
In Count IV of their complaint, Plaintiffs claim the Clinic Defendants attempted to monopolize the relevant market for adult open heart surgery in violation of Section 2 of the Sherman Act. "To demonstrate attempted monopolization a plaintiff must prove (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving market power." Pastore v. Bell Telephone Co. of Pennsylvania, 24 F.3d 508, 512 (citing Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S. Ct. 884, 122 L. Ed. 2d 247 (1993)).
Plaintiffs' evidence of predatory or anticompetitive conduct essentially fits into two categories. First, Plaintiffs rely on the alleged "threats and coercion" that were "instrumental in getting Medicor to ratchet down its referrals" and "getting Hamot to exclude [P]laintiffs from ... every possible outlet for [P]laintiffs to establish new referral sources." (Pls.' Br. at 70.) This is the same conduct that formed the basis of Plaintiffs' section 1 claims. Since we have already concluded there is no evidence such threats were ever made, it follows that such threats could not have been instrumental in the decline of Plaintiffs' practice.
Second, Plaintiffs rely on the Clinic Defendants' alleged failure to assist them in nonemergency situations. Specifically, Plaintiffs claim Dr. D'Angelo forbade Clinic surgeons from assisting Plaintiffs in non-emergency situations in order to make it practically impossible for their two man practice to survive under Hamot's first surgical assistant rule. Defendants have supplied affidavits and deposition testimony denying that such a policy existed. They also point to evidence that they in fact assisted Plaintiffs on several occasions. Plaintiffs' contrary evidence is sufficient to create a material issue of fact concerning whether such a policy existed at the Clinic. Thus, we are left to determine whether, under the circumstances of this case, such a policy could have violated Section 2 of the Sherman Act.[28]
The antitrust laws generally impose no duty to assist a competitor. United States v. Colgate & Co., 250 U.S. 300, 307, 39 S. Ct. 465, 63 L. Ed. 992 (1919). Plaintiffs argue that the Clinic's policy here fits either the "intent" test[29] or the "essential facilities"[30] exception. We need not address these arguments, however, because under the facts presented, the Clinic's failure to assist Plaintiffs could not have caused the Clinic to obtain or maintain a monopoly. As previously discussed, Plaintiffs' practice failed because they did not get enough referrals, not because they did not receive assistance from the Clinic. In other words, this is not a case where Plaintiffs went out of business because they had to pass on large number of referrals because they could not find assistants. Quite to the contrary, Plaintiffs routinely provided assistance for each other on the cases they received.
3. State Law Claims
Count V contains state law antitrust claims based on the same conduct Plaintiffs claim violated the Sherman Act. Since these claims *710 mirror the federal antitrust claims, they rise or fall with Plaintiffs' federal antitrust claims and will receive like disposition. See Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 1014 (3d Cir.1994), cert. denied, 514 U.S. 1063, 115 S. Ct. 1691, 131 L. Ed. 2d 556 (1995).
Count VI contains a state law claim for tortious interference with prospective business relations. To establish a claim for tortious interference with prospective contractual relationships, among other things, a plaintiff must prove the existence of prospective contracts. Alvord-Polk, 37 F.3d at 1015 (citing Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 471 (1979)). "A prospective contract is something less than a contractual right, something more than a mere hope." Id. It exists if there is a reasonable probability that a contract will arise from the parties' current dealings. Id. (citing Glenn v. Point Park College, 441 Pa. 474, 272 A.2d 895, 898-99 (1971)).
Defendants argue Plaintiffs can not identify, with reasonable probability, any future contracts that were tortiously interfered with for the same reason Plaintiffs can not show antitrust violations. Plaintiffs, relying on Posner v. Lankenau Hosp., 645 F. Supp. 1102, 1111-12 (E.D.Pa.1986), contend that they are not required to identify specific business relations that were lost or interfered with to survive summary judgment. To the extent that Posner can be reconciled with the Third Circuit's review of Pennsylvania law in Alvord-Polk, it is inapposite to the case at hand. The Posner court denied summary judgment on the grounds that a "question of fact exist[ed] concerning the reasonableness of plaintiff's expectation of gaining referrals from other physicians at [the hospital]." Posner, 645 F. Supp. 1102. In light of the fact that Medicor was the only significant source of open heart surgery referrals at Hamot and our previous conclusion that Medicor's referral patterns were the product of independent medical judgment, no similar questions remain in this case.
IV. CONCLUSION
An appropriate order follows.
ORDER
AND NOW, this 30th day of September, 1997, for the reasons stated in the accompanying Memorandum Opinion, IT IS HEREBY ORDERED that the following Defendants' motions for summary judgment are granted:
1. The D'Angelo Clinic, George J. D'Angelo, M.D., George F. Kish, M.D., Prabhaker G. Sardesai, M.D. and Wilfredo S. Tan, M.D. [Doc. No. 116];
2. Medicor Associates, Inc. [Doc. No. 124];
3. Hamot Health Foundation and Hamot Medical Center of the City of Erie, Pennsylvania [Doc. No. 137].
JUDGEMENT IS HEREBY ENTERED in favor of the Defendants and against Plaintiffs. The Clerk is instructed to mark the case closed.
NOTES
[1] The only other hospital in Erie at which open heart surgery is performed is St. Vincent's Medical Center.
[2] Plaintiffs allege Medicor had an "exclusive franchise" to provide cardiology services at Hamot as part of the "Hamot Centered Physicians Program" ("HCPP"). This allegation is unsupported by the record. The record shows that while Hamot has entered into exclusive arrangements with other specialists (Albert Dep at 35), it had never done so with Medicor. Other cardiologist have provided services at Hamot (Sharma Aff. ¶ 7; Feraro Aff. ¶ 4; Zone Aff. ¶ 8; Furr Aff. ¶ 5; Furr Dep. 25-26) and Medicor cardiologist maintain privileges at other hospitals (Zone Aff. ¶ 7).
[3] The Clinic was originally founded in the early 1960s. In 1980, it became a professional corporation called Thoracic and Cardiovascular Associates, P.C., but continues to do business as "The D'Angelo Clinic."
[4] The requirement is discussed in more detail below.
[5] Hamot also encourages certain specialists to confine their practice exclusively to Hamot. It also has entered into exclusive dealing agreements with some specialists under which it has agreed not to grant privileges to competing specialists. (See Albert Dep at 35.) These arrangements are discussed in more detail below.
[6] Hamot reserved the right to void any such "franchise" agreement and recruit additional physicians if the need arose. (Id.)
[7] Dr. Hanson's group performed 97 open heart surgeries at Hamot in 1987.
[8] In 1988, Dr. Hanson was the primary surgeon in 42 open heart surgeries and assisted in 37.
[9] Dr. Hanson performed 33 open heart surgeries at Hamot in 1989.
[10] Dr. Hanson's group performed 34 surgeries in 1990. It appears that most of these cases were referred to Plaintiffs from sources other than Medicor.
[11] Hamot initially revoked Dr. Kerth's privileges in 1992, but retreated from its position and reinstated Dr. Kerth's privileges because newly credentialed surgeons received a three year grace period in which to begin meeting the volume requirement.
[12] An amended complaint was effectively filed on March 3, 1997 when this Court granted Plaintiffs' motion for leave to file an amended complaint.
[13] In this respect, Hamot is accused of facilitating the conspiracy. The Third Circuit has held that "those who, with knowledge of the conspiracy, aid or assist in carrying out the purposes of the conspiracy" are equally as liable as the original conspirators. Nanavati, 857 F.2d at 119 (internal citations omitted).
[14] Presumably, Plaintiffs have taken this position because professional peer review actions are entitled to qualified immunity under the Health Care Quality Improvement Act, HCQIA, 42 U.S.C. §§ 11101 et seq. Mathews, 87 F.3d at 634-35.
[15] Hamot also re-raises the arguments that: (1) it could not have conspired as a matter of law under Weiss v. York Hospital, 745 F.2d 786, 814-815 (3d Cir.1984), cert. denied, 470 U.S. 1060, 105 S. Ct. 1777, 84 L. Ed. 2d 836 (1985) and Nanavati v. Burdette Tomlin Memorial Hospital, 857 F.2d 96, 119 (3d Cir.1988), cert. denied, 489 U.S. 1078, 109 S. Ct. 1528, 103 L. Ed. 2d 834 (1989); and (2) it is immune from damages under the HCQIA, 42 U.S.C. §§ 11101 et seq. In ruling on Hamot's motion to dismiss, this Court has already rejected these arguments because Plaintiffs have disclaimed any challenge to professional peer review actions.
[16] As a competitor, the Clinic's motive is apparent on its face. However, the nature of Plaintiffs' section 1 claims are such that, if Medicor and Hamot become entitled to summary judgment, so does the Clinic. Without the participation of Medicor and Hamot, the Clinic could have no control over referrals and could not destroy Plaintiffs' practice.
[17] A believable theory of predatory pricing, therefore, must take into account how the conspirators, if successful, expect to recover more long term monopoly profits than they will sustain short term losses. Id., 475 U.S. at 589, 106 S.Ct. at 1357.
[18] Dr. Kish testified that the desire to have exclusive status was a "common theme" at the Clinic and that, although he could not recall any specific incidents, Dr. D'Angelo had "probably" expressed that sentiment to someone outside the Clinic. (Kish Dep. at 54.)
[19] The record indicates Dr. D'Angelo threatened to move patients to a different hospital over quality of care issues, but that these threats were not taken seriously. (Kish Dep. 32; DiLuzio Dep. 89; Diluzio Aff. 1.)
[20] (Pls.' Ex. 9.)
[21] At oral argument, Plaintiffs speculated that this anomaly could be viewed as an attempt by Hamot to cover its tracks to avoid an antitrust suit. (Tr. at 99-100.) There is no evidence suggesting such a tactic was ever considered.
[22] Plaintiffs' attempt to defeat this fact consists of speculation about how the individual bonuses of the Medicor cardiologists "must be conditioned to some degree on their productivity." (Pls.' Br. at 10 n. 4.)
[23] Even if the statement were admissible, it would not be sufficient to create a material issue of fact so as to help defeat summary judgment. The statement is little more than a comment acknowledging that Medicor was referring exclusively to the Clinic a fact that is not in dispute. The issue is not whether Medicor was referring exclusively to the Clinic, but rather why it was doing so.
[24] In this respect, the record reflects that a trend to refer to the Clinic in lieu of Dr. Hanson's group was already developing prior to the December 1989 staffing meeting which Plaintiffs claim marked the first overt act in furtherance of the conspiracy to deny them referrals.
[25] Dr. Hanson never asked any of the other Clinic Defendants to assist him. (Id. at 487.)
[26] Dr. Hanson stated Dr. Furr told him the criteria was "designed to get Sherafat." (Hanson Dep. 158.) This statement does not show that Dr. D'Angelo was involved in the implementation of the rule or that it was designed to "get" surgeons who competed with the Clinic.
[27] Plaintiffs suggest that Hamot's concern for its inability to measure their quality of care should be viewed as pretext because Hamot could have obtained a statistically significant sample of their surgeries by counting surgeries from past years. As already discussed, contemporary studies had linked maintaining surgical volume to quality of care. Thus, Hamot was perfectly justified in requiring a minimum level of proficiency. Second, Hamot had a legitimate interest in measuring quality of care based on recent surgeries rather than those occurring several years prior.
[28] We do not read Plaintiffs' complaint to allege that such a policy would constitute an illegal combination or conspiracy among the individual Clinic Defendants under Section 1 of the Sherman Act.
[29] Under the "intent" test, "a business is free not to deal with whomever it pleases so long it has no `purpose to create or maintain a monopoly.'" Byars v. Bluff City News Co., Inc., 609 F.2d 843, 855 (6th Cir.1979) (citing Colgate, 250 U.S. at 375).
[30] The "essential facilities" doctrine applies when a plaintiff can show "(1) control of the essential facility by a monopolist; (2) the competitor's inability practically or reasonably to duplicate the essential facility; (3) denial of the use of the facility to a competitor; and (4) the feasibility of providing the facility." Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737, 748 (3d Cir.1996) (citations omitted).
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989 F. Supp. 1222 (1997)
Julius TURNER, Plaintiff,
v.
ST. LOUIS COUNTY, MISSOURI, Defendant.
No. 4:96 CV 963 DDN.
United States District Court, E.D. Missouri, Eastern Division.
December 19, 1997.
*1223 Martha A. Michaels, Polster and Lieder, St. Louis, MO, for plaintiff.
Julius Turner, St. Louis, MO, pro se.
Patricia J. Redington, Assoc. Cty. Counselor, Eva C. Konieczny, St. Louis County Counselor Office, Clayton, MO, for Defendant.
MEMORANDUM
NOCE, United States Magistrate Judge.
This matter is before the court upon the motion of defendant for summary judgment (Doc. No. 30). The parties have consented to the exercise of jurisdiction by the undersigned United States Magistrate Judge. 28 U.S.C. § 636(c).
Plaintiff Julius Turner commenced this action against St. Louis County, Missouri,[1] seeking relief under the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101-12213; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e-2000e-5; Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634; and 42 U.S.C. § 1981. In his first amended complaint, plaintiff alleges that he was unlawfully dismissed from his position with the St. Louis County Police Department based on disability, age and race.
Defendant has moved for summary judgment on all counts. Summary judgment is appropriate when the record, viewed in the light most favorable to the nonmoving party, reveals that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). The nonmovant's evidence is to be believed and all justifiable inferences are to be drawn in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). However, in the employment discrimination context "summary judgments should be used sparingly." Chock v. Northwest Airlines, 113 F.3d 861, 862 (8th Cir. 1997); Crawford v. Runyon, 37 F.3d 1338, 1341 (8th Cir.1994).
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of race, gender, religion or national origin. The order and allocation of proof in cases where there is no direct evidence of discrimination is governed by the three-stage burden shifting analysis set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973) and St. Mary's Honor Center v. Hicks, 509 U.S. 502, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993). See Jetton v. McDonnell Douglas Corp., 121 F.3d 423, 425 (8th Cir.1997). This analysis is also used for claims under 42 U.S.C. § 1981, the ADEA, and the ADA. Roxas v. Presentation College, 90 F.3d 310, 315 (8th Cir. 1996); Hutson v. McDonnell Douglas Corp., 63 F.3d 771, 776 (8th Cir.1995); Price v. S-B Power Tool, 75 F.3d 362, 364-65 (8th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 274, 136 L. Ed. 2d 197 (1996).
Initially, the plaintiff must establish a prima facie case of discrimination; if done, the burden shifts to the defendant employer, who must articulate a legitimate, nondiscriminatory reason for the adverse employment action, in order to rebut a presumption of discrimination; if done, the presumption drops, and plaintiff has the opportunity to demonstrate that the proffered reason was not the true reason for the employment decision, *1224 i.e., may prove pretext. Williams v. Ford Motor Co., 14 F.3d 1305, 1309 (8th Cir.1994). However, at all times, the plaintiff retains the ultimate burden of persuasion to show the adverse employment action was a result of intentional, unlawful discrimination. Kobrin v. University of Minnesota, 121 F.3d 408, 413-14 (Kobrin II) (8th Cir.1997). To succeed against a motion for summary judgment, plaintiff must present sufficient evidence of intentional discrimination by defendant to create a genuine issue of fact for trial. Rothmeier v. Investment Advisers, Inc., 85 F.3d 1328, 1337 (8th Cir.1996).
Plaintiff alleges that he is a black man, aged 54 and that in March 1991 he was diagnosed as suffering from memory deficits, bipolar affective disorder and manic depression. He alleges that he was granted sick leave and then leave of absence without pay. He further alleges that on January 1, 1995, he was dismissed from his job, although he was qualified, able, ready and willing to return to work. He also alleges that white persons and younger persons with comparable disabilities were treated differently and that they were granted longer periods of extended medical leave and were permitted to return to work in a job which they could perform with reasonable accommodations. He alleges that defendants refused to make reasonable accommodations and treated him differently because of his age, race and disability.
He further alleges that he was the object of abusive racial epithets on a regular basis in the presence of higher officials. He alleges that this behavior worsened soon after a commissioned police commander was appointed to oversee his bureau. He alleges that he was suddenly forced to produce an unreasonable quantity of work in an inadequate period of time, and that all of these factors contributed to his deteriorating mental condition.
Defendant contends that it did not discriminate against plaintiff on the basis of age, race or disability, that he can show no evidence such discrimination, and that he voluntarily subjected himself to defendant's well-understood policy of construing the actions of an employee in plaintiff's situation as resignation without notice.
For the purposes of summary judgment, the evidence is examined in a light most favorable to plaintiff. The undersigned finds that plaintiff's allegations, supported by testimony in affidavits, and the undisputed facts of the conditions under which plaintiff was discharged constitute enough to satisfy the elements of plaintiff's prima facie case, and further create evidence from which an inference of illegal discrimination may reasonably be drawn. There are genuine issues of material fact in dispute, the merits and credibility of which may only be evaluated by the finder of fact at trial. See Miners v. Cargill Communications, Inc., 113 F.3d 820 (8th Cir. 1997), cert. denied, ___ U.S. ___, 118 S. Ct. 441, 139 L. Ed. 2d 378 (1997).
Defendant contends that plaintiff is estopped from alleging violations of the ADA because he previously admitted an inability to work (in his worker's compensation litigation); therefore, he cannot meet the ADA requirement that he was qualified for work when fired. Defendant refers the Court to Dush v. Appleton Electric Co., 124 F.3d 957 (8th Cir.1997) and Budd v. ADT Security Systems, Inc., 103 F.3d 699 (8th Cir.1996) (per curiam). Plaintiff counters that these cases do not create a per se defense of estoppel, and the undersigned agrees. Plaintiff contends that he can produce evidence that while he was unable to work during the period for which he sought worker's compensation benefits, his condition was such that he was subsequently able and willing to work. Pl.Mem., Doc. No. 33, at 5. The Eighth Circuit has instructed that "special attention must be given to the circumstances" in evaluating such an issue. Dush, at 963. In any event, the Circuit has explicitly declined to hold that a per se defense of estoppel exists under such conditions. Id., at n. 8 ("[T]he issue, at least for the time being, remains open in our Circuit"). See also Bizelli v. Amchem, 981 F. Supp. 1254, 1257-58 (E.D.Mo.1997).
For these reasons, the motion of defendants for summary judgment is denied. An appropriate order is issued herewith.
NOTES
[1] Defendant St. Louis County Police Department was dismissed pursuant to Court order. Doc. No. 34.
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292 B.R. 369 (2003)
Chad and Bobbi FRELIN, Joseph and Sheila Woodall, Cecil, Kevin and Dixie Abbott, John and Joetta Tatum, Terry and Deborah Burkholder, and Joseph Combs, On Behalf of Themselves and as Representatives of A Class of All Others Similarly Situated, Plaintiffs
v.
OAKWOOD HOMES CORPORATION, Oakwood Mobile Homes, Inc., Oakwood Acceptance Corporation, Schult Mobile Homes, American Bankers Insurance Group, Assurant Group, and John Does 1-50, Defendants
No. 4:02-AP-1363E.
United States Bankruptcy Court, E.D. Arkansas, Little Rock Division.
April 30, 2003.
*370 *371 *372 *373 Mr. Roger D. Rowe, Little Rock, AR, for Oakwood Homes Corp.
Mr. Byron Freeland, Little Rock, AR, for American Bankers Ins. Group.
Steven A. Owings, Gina M. Cothern, Ira M. Levee, Roseland, NJ, for Plaintiffs.
ORDER GRANTING PLAINTIFFS' MOTION FOR REMAND OF STATE COURT CIVIL ACTION AND FOR ABSTENTION AND DENYING DEFENDANTS' MOTION TO TRANSFER TO THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
AUDREY R. EVANS, Bankruptcy Judge.
On February 18, 2003, the Court heard the Defendants' Motion to Transfer to the *374 United States Bankruptcy Court for the District of Delaware and the Plaintiffs' Motion for Remand of State Court Civil Action and for Abstention. Roger D. Rowe appeared on behalf of Defendants Oakwood Homes Corporation, Oakwood Mobile Homes, Inc., Oakwood Acceptance Corporation, and Schult Mobile Homes (the "Oakwood Defendants" or "Oakwood Debtors"). Byron Freeland appeared on behalf of Defendants American Bankers Insurance Company of Florida, American Bankers Insurance Group, and Assurant Group (the "American Bankers Defendants"). Steven A. Owings and Gina M. Cothern appeared on behalf of the Plaintiffs. Ira M. Levee also appeared on behalf of the Plaintiffs via telephone. Following oral argument, the Court took the matter under advisement.
Upon consideration of the pleadings filed and oral argument at hearing as well as the briefs filed by counsel and applicable law, the Court makes the following findings of fact and conclusions of law in accordance with Rule 7052 (made applicable to contested matters by Rule 9014(c)).[1]
PROCEDURAL BACKGROUND
Plaintiffs filed suit against the Oakwood Defendants and the American Bankers Defendants in the Circuit Court of Saline County, Arkansas on February 5, 2001 (the "State Court Action"). The Oakwood Defendants separately filed chapter 11 bankruptcies on November 15, 2002, in the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"). The separate chapter 11 cases have been consolidated for procedural purposes and are being jointly administered by the Delaware Bankruptcy Court as In re Oakwood Homes Corp., et al., Case No. 02-13396. On December 16, 2002, the Oakwood Defendants and American Bankers Defendants removed the State Court Action to the United States Bankruptcy Court for the Eastern and Western Districts of Arkansas. The Oakwood Defendants and American Bankers Defendants moved to transfer the case to the United States Bankruptcy Court for the District of Delaware on December 17, 2002. Plaintiffs subsequently filed a Motion for Remand of State Court Civil Action and for Abstention on January 17, 2003.
FACTUAL BACKGROUND
The following facts were alleged by Plaintiffs and/or Defendants in their pleadings and/or at oral argument, and as no objections were made contesting the validity of these facts, the Court accepts the facts as plead.
The State Court Action
The State Court Action is a deceptive trade practice action brought on behalf of Plaintiffs individually and a class of similarly situated individuals. The Plaintiffs purchased mobile homes from the Oakwood Defendants who financed the transactions; Plaintiffs also obtained insurance coverage in connection with those transactions. The Plaintiffs allege that the Oakwood and American Bankers Defendants willfully engaged in a nationwide scheme to defraud individuals by placing false charges on statements which represented no value to customers, and by selling sham insurance products (including home owners' insurance and term credit life insurance) which were added to the principal amount of the Plaintiffs' loans. The State Court Action pled violations of Arkansas, *375 North Carolina, and Florida's Unfair and Deceptive Trade Practices Acts and also alleged common law fraud under Arkansas, North Carolina and Florida law. Plaintiffs demanded a trial by jury. Similar lawsuits by other individuals have been filed against the Oakwood and American Bankers Defendants in Mississippi and North Carolina.
During the course of the State Court Action, the State Court decided certain class action issues. Specifically, class certification was granted as to those Plaintiffs who had one of the alleged false charges on a statement, but denied as to those Plaintiffs with only insurance-related claims. The State Court also decided that certain arbitration clauses were not binding. That decision is currently on appeal to the Arkansas Supreme Court; appellate briefs have been filed but no oral argument had been scheduled as of the date of hearing. Discovery in the State Court Action had commenced. The State Court granted a restraining order in favor of Plaintiffs preventing the Oakwood Defendants from destroying sales records and advertising materials maintained by sales locations in Arkansas that were being closed. Plaintiffs also filed a motion to compel discovery which was granted but before complying with that discovery order, the Oakwood Defendants filed bankruptcy in Delaware.
The Oakwood Defendants' Bankruptcies
The Oakwood Defendants separately filed chapter 11 bankruptcies on November 15, 2002, in the Delaware Bankruptcy Court. One of the three Oakwood Defendants is a Delaware Limited Liability Company with its principal place of business in North Carolina. The other Oakwood Defendants are incorporated in North Carolina and also have their principal places of business in North Carolina.
The American Bankers Defendants have filed a proof of claim in the Oakwood Defendants' bankruptcies for contractual and common law indemnification against the Oakwood Debtors for any liability resulting from the Plaintiffs' claims in state courts.
In the Oakwood Debtors' bankruptcy cases, the Oakwood Defendants have proposed certain alternative dispute resolution ("ADR") procedures to resolve claims against them, including the Plaintiffs' claims. On February 14, 2003, the Oakwood Debtors and American Bankers Defendants commenced an adversary proceeding in the Delaware Bankruptcy Court seeking an order extending the automatic stay to the American Bankers Defendants and enjoining the continued prosecution of the State Court Action. On March 27, 2003, the Delaware Bankruptcy Court held a hearing in this adversary proceeding and declined to extend the automatic stay to the American Bankers Defendants, but did extend the stay to any former or current employees of the Oakwood Defendants.[2] The Delaware Bankruptcy Court also indicated that the State Court Action could probably proceed once the Oakwood Debtors had a confirmed chapter 11 plan.[3]
*376 JURISDICTION
The Court has jurisdiction over the removed State Court Action pursuant to 28 U.S.C. §§ 1452(a) and 1334(b). Section 1452(a) provides:
A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under 1334 of this title.
Because the State Court Action was originally filed in Saline County Circuit Court, and Saline County is within the Eastern District of Arkansas, the Bankruptcy Court for the Eastern District of Arkansas is the appropriate court to which this lawsuit should be removed provided this Court has jurisdiction under § 1334.[4] Rule 9027 governs the procedures for removing a state court proceeding to federal court, and establishes the deadline for such removal. There is no question that the notice of removal filed by the Oakwood Defendants and American Bankers Defendants was timely filed under Rule 9027. Regardless of whether the removed State Court Action is a core or non-core proceeding in bankruptcy under 28 U.S.C. § 157[5], the Court may enter final orders with respect to motions for abstention, remand and transfer. See Christensen v. St. Paul Bank for Cooperatives (In re Fulda Independent Co-op), 130 B.R. 967, 973 n. 5 (Bankr.D.Minn.1991) (explaining that the Judicial Improvements Act of 1990 amended §§ 1452(b) and 1334(c)(2) to remove prohibition on appeals to district court such that a bankruptcy judge may enter final orders with respect to remand and abstention, and that subsequent amendments to the Bankruptcy Rules provided for motions for remand and abstention to be governed by Rule 9014 as contested matters). See also Brizzolara v. Fisher Pen Co., 158 B.R. 761, 767-769 (Bankr.N.D.Ill.1993) (holding that motions for abstention, remand and transfer are core proceedings under 28 U.S.C. § 157(b)(2)(A)).
Bankruptcy Jurisdiction Under § 1334
For removal to this Bankruptcy Court to be proper, this Court must have jurisdiction over the State Court Action under § 1334. Pursuant to § 1334, federal district courts, which include bankruptcy courts, have exclusive jurisdiction over all civil proceedings under title 11 (i.e., the bankruptcy code), and original but not exclusive jurisdiction over all cases "arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(a)-(b). A case "arises under" title 11 if a claim asserted is created by or based on a provision of the bankruptcy code. See *377 National City Bank v. Coopers and Lybrand, 802 F.2d 990, 994 (8th Cir.1986). A case "arises in" a case under title 11 if it is not based on any right expressly created by the bankruptcy code but has no existence outside the bankruptcy case. See In re Chambers, 125 B.R. 788, 793 (Bankr.W.D.Mo.1991) (citing In re Wood, 825 F.2d 90, 97 (5th Cir.1987)). The Eighth Circuit Court of Appeals has set forth the following test for determining whether a case is "related to" a case under title 11:
"[T]he test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy * * *. An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action * * * and which in any way impacts upon the handling and administration of the bankrupt estate."
Dogpatch Properties, Inc. v. Dogpatch U.S.A., Inc. (In re Dogpatch U.S.A., Inc.), 810 F.2d 782, 786 (8th Cir.1987) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984) (emphasis in original)). See also Specialty Mills, Inc. v. Citizens State Bank, 51 F.3d 770, 773-774 (8th Cir.1995).
The Defendants allege that this Court has jurisdiction under § 1334(b) because the State Court Action arises under title 11, or arises in or relates to a case under title 11.[6] Specifically, the Defendants contend that the basis of the State Court Action "ha[s] a direct and immediate effect and impact upon the Oakwood Debtors, the Chapter 11 cases, and the Oakwood Debtors' effort to reorganize." Because the State Court Action raising causes of action under state law was filed by Plaintiffs almost two years prior to the Oakwood Defendants' bankruptcy filings, the State Court Action clearly did not arise under title 11 or in the Oakwood Defendants' bankruptcy cases. Rather, this Court has "related to" jurisdiction over the State Court Action in that the outcome of the State Court Action may result in an additional liability of the Oakwood Defendants, and therefore impact their bankruptcy cases.
Core vs. Non-Core Proceedings
Once the Court's jurisdiction is established, the Court determines whether a civil proceeding is categorized as either a core proceeding or a non-core proceeding. Core proceedings "arise under" or "arise in" a bankruptcy case; non-core proceedings are merely "related to" the bankruptcy case. 28 U.S.C. § 157(b)-(c). See also Specialty Mills, Inc., 51 F.3d at 773-774. Plaintiffs maintain that the State Court Action is not a core proceeding because the lawsuit consists of state law causes of action that do not arise in or under the bankruptcy code. The Defendants contend that the proceeding is a core proceeding under § 157(b)(2)(B) (providing that core proceedings include "the allowance or disallowance of claims against the estate") and § 157(b)(2)(O) (providing that core proceedings include proceedings affecting "the adjustment of the debtor-creditor . . . relationship") because the American Bankers Defendants have filed a proof of claim in the Oakwood Defendants' bankruptcy *378 case raising indemnification issues that may arise as a result of the State Court Action.
The Court finds that the State Court Action is a non-core proceeding in that it is only "related to" the Oakwood Defendants' bankruptcy cases. Furthermore, the Court finds that neither § 157(b)(2)(B) nor § 157(b)(2)(O) are sufficient to classify the State Court Action as a core proceeding. With respect to § 157(b)(2)(B), lawsuits filed in state court do not automatically become core proceedings in bankruptcy simply because a related proof of claim is filed in the bankruptcy case. While some courts hold that filing a proof of claim may indeed transform an otherwise unrelated pre-petition lawsuit into a core proceeding, those courts hold that such actions become core proceedings only if the proof of claim and State Court Action raise the same issues. See Steinman v. Spencer (In re Arden Phoenix Group 1700), 206 B.R. 737, 747-748 (Bankr.E.D.Pa.1996) (citations omitted). Even if the Court were to unequivocally adopt Steinman's holding (which it declines to do at this time), the Defendants have failed to demonstrate that under the facts of this case, the proof of claim filed by the American Bankers Defendants transforms the State Court Action into a core proceeding. While the American Bankers Defendants have filed a proof of claim in the Oakwood Debtors' bankruptcy cases, neither the Plaintiffs nor the Defendants allege that the Plaintiffs have filed a proof of claim in the Oakwood Defendants' bankruptcy cases. Accordingly, this Court has no evidence that the exact issues raised in Plaintiffs' State Court complaint (i.e., the Defendants' liability to Plaintiffs) are before the Delaware Bankruptcy Court for adjudication even though the Defendants' liability, if any, is relevant to the Oakwood Defendants' indemnification liability, if any. In other words, the Oakwood and American Bankers Defendants' potential liability to the Plaintiffs is not before the Delaware Bankruptcy Court, but rather, only the Oakwood Defendants' potential indemnification liability to the American Bankers Defendants is directly before the Delaware Bankruptcy Court at this time. Consequently, the proof of claim filed by the American Bankers Defendants does not transform the State Court Action filed by Plaintiffs into a core proceeding.
Moreover, the Defendants' argument that the State Court Action is a core proceeding under § 157(b)(2)(B) as a result of the indemnification claim filed by the American Bankers Defendants assumes that the same issues must be presented to the Delaware Bankruptcy Court for adjudication during the claims allowance process. This is not necessarily so. Rather, the claims allowance process is primarily a mechanism to determine if the holder of a claim is entitled to receive a distribution in the case. See Miller & Miller Auctioneers, Inc. v. Ritchie Brothers Auctioneers International, L.P., et al. (In re Missouri Properties, Ltd.), 211 B.R. 914, 920 (Bankr.W.D.Mo.1996) ("The Bankruptcy Code sets forth specific procedures for creditors to file claims against an estate, for the estate to object to such claims, and for the Bankruptcy Court to determine whether such claims should be allowed, and if so, in what amount. Fed. R. Bankr.P. 3001-3008."). Where a debtor's liability has not yet been determined, it may be litigated in an objection to a creditor's proof of claim; however, the debtor's liability may also be determined by another court, in which case, the court's decision is generally given res judicata effect, and the creditor files a proof of claim for the judgment amount in the debtor's bankruptcy case. Accordingly, a *379 state court lawsuit against a debtor which may result in a finding that debtor is liable to another party is not a core proceeding under § 157(b)(2)(O) because it does not adjust a previously established debtor-creditor relationship, but determines whether such relationship exists at all. See In re Missouri Properties, Ltd., 211 B.R. at 920.
Jurisdiction to Decide Plaintiffs' Motion for Remand and Abstention
Finally, the Defendants contend that this Court should not decide the Plaintiffs' motion to remand and abstain, but instead should transfer the case to the Delaware Bankruptcy Court to allow that court to decide whether it should hear the State Court Action or remand the case to State Court. In support of this argument, Defendants cite case law which holds that the bankruptcy court in which the bankruptcy is pending (usually referred to as the "home court") is in the best position to determine the issues underlying motions to abstain or remand. See Nelson v. First Lenders Indemnity Company, 1998 WL 378376 (N.D.Miss.1998); Philadelphia Health Care Trust v. Tenet Health System Philadelphia, Inc. (In re Allegheny Health, Education and Research Foundation), 1999 WL 1033566 (Bankr.E.D.Pa.1999); Thomas v. Lorch (In re Wedlo, Inc.), 212 B.R. 678 (Bankr.M.D.Ala.1996); Weniger v. Intermet Realty Partnership (In re Convent Guardian Corp.), 75 B.R. 346 (Bankr.E.D.Pa.1987). The theory underlying this line of cases is often referred to as the "conduit" court theory because it treats the local bankruptcy court as a mere conduit with little role in determining where the removed lawsuit should be heard. Another line of case law holds that the bankruptcy court to which the state court lawsuit is removed ("the local bankruptcy court") has jurisdiction to decide a pending motion to abstain or remand before determining whether venue is proper in the home bankruptcy court. See Ni Fuel Company, Inc. v. Jackson, 257 B.R. 600 (N.D.Okla.2000); Lone Star Industries, Inc. v. Liberty Mutual Ins., 131 B.R. 269 (D.Del.1991); Gabel v. Engra, Inc. (In re Engra, Inc.), 86 B.R. 890 (S.D.Tex.1988); Maryland Casualty Company v. Aselco, Inc., 223 B.R. 217 (D.Kan.1998); AG Industries, Inc. v. AK Steel Corp. (In re AG Industries, Inc.), 279 B.R. 534 (Bankr.S.D.Ohio 2002). Unlike the conduit court theory cases, which provide little if any legal analysis to support transfer to the home court before deciding remand and abstention issues, this line of cases provide strong statutory and logical support for the proposition that the local bankruptcy court should decide "whether any bankruptcy court should hear a proceeding before it determines which bankruptcy court should hear it." Lone Star Industries, Inc., 131 B.R. at 273 (emphasis in original) (citations omitted). In Engra, the Southern District of Texas pointed out that § 1334 does not limit jurisdiction over all bankruptcy matters to the district where the bankruptcy was filed. 86 B.R. at 893. "A careful reading of section 1334 demonstrates that Congress considered the situations in which the `home court' should have exclusive jurisdiction and when such jurisdiction should be coextensive." Id. (comparing § 1334(a)-(b) providing jurisdiction to district courts in the plural, to § 1334(d) which provides only the district court in which a case is filed with exclusive jurisdiction over property of the estate and property of the debtor).[7]*380 Likewise, § 1452 provides for removal to the district in which the removed civil action was pending rather than the district in which the bankruptcy case was filed, and provides that the court to which the civil action is removed may remand such cause of action on any equitable ground. See id.; AG Industries, 279 B.R. at 540. Additionally, following the conduit court theory, which results in an automatic transfer of the bankruptcy case, assumes that venue is proper in the home bankruptcy court and renders the change of venue statutes meaningless. See Lone Star Industries, 131 B.R. at 273. Moreover, the change of venue statute applicable to bankruptcy proceedings, 28 U.S.C. § 1412, clearly provides "that the transfer of a case from a local bankruptcy court to a home bankruptcy court is discretionary rather than mandatory or automatic." AG Industries, 279 B.R. at 540 (citing Irwin v. Beloit Corporation (In re Harnischfeger Industries, Inc.), 246 B.R. 421, 436, n. 42 (Bankr.N.D.Ala.2000)). Accordingly, not only does this Court have jurisdiction to decide the Plaintiffs' motion to remand and/or abstain, the Court should and will decide whether remand and/or abstention is required before determining whether venue is proper in Delaware.
MANDATORY ABSTENTION
The Court begins its analysis with mandatory abstention under § 1334(c)(2) because neither this Court nor the Delaware Bankruptcy Court has jurisdiction to try the State Court Action if the six factors set forth in § 1334(c)(2) are present. See Fitzgeralds Sugar Creek, Inc. v. Kansas City Station Corp. (In re Fitzgeralds Gaming Corp.), 261 B.R. 1, 8 (Bankr.W.D.Mo.2001); Girard v. Michener (In re Michener), 217 B.R. 263, 267 (Bankr.D.Minn.1998); Miller & Miller Auctioneers, Inc. v. Ritchie Brothers Auctioneers International, L.P., et al., (In re Missouri Properties, Ltd.), 211 B.R. 914, 919 (Bankr.W.D.Mo.1996). The Court notes that some courts have held otherwise. For instance, the Ninth Circuit has held that abstention does not apply to a removed case because there is no parallel proceeding in state court from which to abstain (because the proceeding has been removed to federal court). See Security Farms v. International Brotherhood of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1010 (9th Cir.1997) ("To require a pendant state action as a condition of abstention eliminates any confusion with 28 U.S.C. § 1452(b), which provides district courts with the authority to remand civil actions properly removed to federal court, in situations where there is no parallel proceeding."). See also Personette v. Kennedy (In re Midgard Corp.), 204 B.R. 764, 773-774 (10th Cir. BAP 1997) (listing cases holding that abstention can never apply to a removed case). This Court rejects the Ninth Circuit's position because it is not supported by the text of § 1334(c)(2) which does not require that an action be currently pending in State court, but only that an action have been commenced in State court that can timely be adjudicated there. Other courts agree. See Thomas v. R.J. Reynolds Tobacco Co., 259 B.R. 571, 576 n. 5 (S.D.Miss.2001) (citing In re Southmark Corp., 163 F.3d 925, 929 (5th Cir.1999)); In re Midgard Corp., 204 B.R. at 774 (holding that abstention does apply to removed cases and listing cases that hold the same). See also Fitzgeralds Sugar Creek, Inc., 261 B.R. at 8 ("The vast majority of courts, however, hold that mandatory abstention applies to cases that have been removed to federal court.") (citations omitted); *381 Technology Outsource Solutions, LLC v. ENI Technology, Inc., 2003 WL 252141, *3 (W.D.N.Y.2003) ("The mandatory abstention statute, § 1334(c)(2), clearly states, `if an action is commended [sic]' and not, `if an action is pending.' The Court is persuaded by the reasoning in the majority of U.S. Courts of Appeals that have held that § 1334(c)(2) mandatory abstention is applicable in cases removed from state court.") (rejecting reasoning of In re Adelphia Communications Corp., 285 B.R. 127 (Bankr.S.D.N.Y.2002) regarding application of mandatory abstention to removed proceedings) (other citations omitted).
Legal Standard: § 1334(c)(2)
Having determined that mandatory abstention applies to removed cases, the Court turns to the requirements of § 1334(c)(2). Pursuant to § 1334(c)(2), this Court must abstain from hearing the State Court Action if: (1) a timely motion is made; (2) the claim or cause of action is based upon state law; (3) the claim or cause of action is "related to" a bankruptcy case, but did not "arise in" or "arise under" the bankruptcy case; (4) such action could not have been commenced in federal court absent § 1334 jurisdiction; (5) such action is commenced in State Court; and (6) such action can be timely adjudicated in State Court. See In re Titan Energy, Inc., 837 F.2d 325, 333 n. 14 (8th Cir.1988). The movant has the burden to prove that abstention is required under § 1334(c)(2). See All American Laundry Service v. Ascher (In re Ascher), 128 B.R. 639, 644 (Bankr.N.D.Ill.1991).
Parties' Arguments and Court's Findings
Plaintiffs contend that all the elements for mandatory abstention under § 1334(c)(2) are present in this case. Defendants concede that the first two elements are met but contend that Plaintiffs have failed to prove that the other elements necessary for mandatory abstention are present in this case. The Court finds that Plaintiffs have proven that mandatory abstention is appropriate in this case. First, the Court has already determined that the proceeding is a non-core proceeding, and accordingly, will not address Defendants' arguments with respect to that element. Second, because the State Court Action has been commenced in State Court, that requirement has been met. Third, the Court finds that the action could be timely adjudicated in State Court. It has been pending there for two years, the State Court has already decided key issues such as class certification and the applicability of certain ADR agreements. Although the State Court's decision on the ADR agreements is currently pending before the Arkansas Supreme Court, this Court does not find that removing the lawsuit from the Arkansas' courts will result in more a timely decision. Appeals may be made from the Delaware Bankruptcy Court as well. Additionally, the State Court has considered and ruled upon at least two discovery motions in the State Court Action. In sum, progress is being made in the State Court whereas the Delaware Bankruptcy Court would be "starting over." Additionally, the Court was requested to and takes judicial notice of the caseload currently pending before Delaware's Bankruptcy Court.[8] Statistics cited by the National Conference of Bankruptcy Judges' Legislative Committee in connection with the Bankruptcy Judgeship Act of 2003[9] report that the Delaware Bankruptcy *382 Court has 13,537 weighted filings per judgeship. (Clearly, additional judges are needed in Delaware). In comparison, other Bankruptcy Courts that have been approved for additional judgeships only have between 1700 and 3200 weighted filings per judgeship. The Delaware Bankruptcy Court's high volume of cases does not indicate that it would be more able to timely adjudicate the State Court Action, especially where the State Court Action has already been pending in the Arkansas State Court for two years.
The remaining element for mandatory abstention under § 1334(c)(2) requires that there be no independent basis for federal jurisdiction outside of § 1334 (bankruptcy jurisdiction). Although Plaintiffs contend that neither federal question nor diversity jurisdiction exist, Defendants argue that diversity jurisdiction is in fact present such that there is an independent basis for federal jurisdiction of the State Court Action. For diversity jurisdiction to exist, there must be both diversity of citizenship and damages in excess of$75,000. 28 U.S.C. § 1332. Plaintiffs concede that none of the corporate Defendants are incorporated in Arkansas or have their principal place of business in Arkansas but allege that their damages are less than $75,000 per plaintiff (or in the case of married couples, $75,000 per couple). The Defendants argue that Plaintiffs' jurisdictional statement listing their damages as "less than $75,000" is not sufficient to destroy diversity jurisdiction. In support of this contention, Defendants cite De Aguilar v. Boeing Co., 47 F.3d 1404 (5th Cir.1995), which holds that although the initial burden is on the removing party to show that federal jurisdiction exists, the face of the plaintiff's pleading will not control if made in bad faith. De Aguilar is primarily about what burden of proof the defendant must meet in order to prove that the plaintiff's pleading as to amount in controversy is not made in good faith or is otherwise incorrect. The Fifth Circuit concluded, "[c]onsequently, the plaintiff's claim remains presumptively correct unless the defendant can show by a preponderance of the evidence that the amount in controversy is greater than the jurisdictional amount." Id. at 1412. The Arkansas District Court has held that where no specific amount of damages is pled, the party asserting that federal jurisdiction exists has the burden to prove "to a legal certainty" that the amount in controversy is incorrect. Williams v. Motel 6 Multipurpose, Inc., 120 F.Supp.2d 776, 781 (E.D.Ark.1998) (In class action suit where plaintiff pled damages of "less than $74,500 per person," the court held "[w]here, as here, a Complaint specifically states that total actual and punitive damages sought by the named plaintiff and each individual putative class member is under the requisite amount for federal diversity jurisdiction, the burden is on a removing defendant to prove `to a legal certainty' that the amount in controversy exceeds the jurisdictional amount.") (citations omitted). The Defendants did not meet this burden, but rather alleged that pleading damages of "less than $75,000" is insufficient as a matter of law. Accordingly, the Court finds that federal diversity jurisdiction does not exist on the face of Plaintiffs' State Court Complaint, and therefore, all the requirements for mandatory abstention apply, and the State Court Action must be remanded to State Court.
DISCRETIONARY ABSTENTION AND EQUITABLE REMAND
Although the Court has determined that mandatory abstention requires that the case be remanded to State Court, the *383 Court alternatively rules that discretionary abstention and equitable remand require that the case be remanded to State Court as well.
Legal Standard: § 1334(c)(1)
Bankruptcy courts have discretion to abstain from hearing core or non-core proceedings under 28 U.S.C. § 1334(c)(1). That section provides:
Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11, or arising in or related to cases under title 11.
In addition to the general standards outlined in § 1334(c)(1), courts have developed a number of factors to aid in determining whether discretionary abstention under § 1334(c)(1) is appropriate. As stated by the Eighth Circuit's Bankruptcy Appellate Panel in In re Williams, these factors include:
(1) the effect or lack thereof on the efficient administration of the estate if a Court recommends abstention,
(2) the extent to which state law issues predominate over bankruptcy issues,
(3) the difficult or unsettled nature of the applicable law,
(4) the presence of a related proceeding commenced in state court or other nonbankruptcy court,
(5) the jurisdictional basis, if any, other than 28 U.S.C. § 1334,
(6) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case,
(7) the substance rather than the form of an asserted `core' proceeding,
(8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court,
(9) the burden [on] the bankruptcy court's docket,
(10) the likelihood that the commencement of the proceeding involves forum shopping by one of the parties,
(11) the existence of a right to a jury trial, and
(12) the presence in the proceeding of nondebtor parties.
256 B.R. 885 (2001) (citations omitted). Additionally, "[w]here most of the criteria that Congress established for mandatory abstention have been met, `bankruptcy courts should give careful consideration [to] whether it would be appropriate to exercise their discretion to abstain under section 1334(c)(1).'" Titan Energy, Inc., 837 F.2d at 333 n. 14 (quoting In re Futura Indus., Inc., 69 B.R. 831, 834 (Bankr.E.D.Pa.1987)).
Legal Standard: § 1452(b)
A bankruptcy court may also remand a removed action under 28 U.S.C. § 1452(b) on equitable grounds. Section 1452(b) provides, in part:
The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground.
The analysis used to determine whether equitable remand is just under § 1452(b) is virtually identical to that used to determine whether discretionary abstention is merited under § 1334(c)(1). See Baxter Healthcare Corporation v. Hemex Liquidation Trust, 132 B.R. 863, 869 (N.D.Ill.1991). In addition to the factors outlined above, the bankruptcy court should consider the following factors in ruling on a motion to remand under § 1452(b):
(1) whether remand serves principles of judicial economy;
*384 (2) whether there is prejudice to unremoved parties;
(3) whether the remand lessens the possibilities of inconsistent results; and
(4) whether the court where the action originated has greater expertise.
See Arkansas Department of Human Services Division of Medical Services v. Black & White Cab Company, Inc. (In re Black & White Cab Company, Inc.), 202 B.R. 977 (Bankr.E.D.Ark.1996) (citing Baxter Healthcare Corporation, 132 B.R. at 867-868).
Plaintiffs' Arguments
In support of discretionary abstention and equitable remand, Plaintiffs argue that removal of the State Court Action would result in a waste of judicial resources in that the State Court Action involves state law, has been pending for over two years, and the State Court has decided numerous motions, including class certification and discovery issues. For the same reasons, Plaintiffs assert that the State Court has greater expertise than the Delaware Bankruptcy Court to decide the State Court Action. Plaintiffs also argue that removal would result in significant prejudice to them as the involuntarily removed parties because they are Arkansas residents and litigating the case in Delaware would result in significant expense, inconvenience and delay. Plaintiffs also assert that removal is inappropriate because no bankruptcy issues are involved. Finally, Plaintiffs argue that keeping the lawsuit in State Court will benefit the Debtors' bankruptcy estates in that the lawsuit should be decided more quickly that it would be in Delaware Bankruptcy Court.
Defendants' Arguments
In their opposition to abstention and remand, the Defendants assert that principles of judicial economy and the potential effect on the Oakwood Debtors' bankruptcy estates require that the case be transferred to the Delaware Bankruptcy Court. Defendants also rely on the "strong congressional policy favoring a centralized adjudication of all matters relating to a bankruptcy case" in arguing that remanding the State Court Action to State Court will result in piecemeal litigation. The Defendants' argument focuses on the fact that the American Bankers Defendants have filed a proof of claim for any liability that may result from the State Court Action in the Oakwood Debtors' bankruptcy cases, and concludes that the same issues will be presented to the Delaware Bankruptcy Court for decision there. The Oakwood Defendants assert that if the automatic stay is not lifted as to them, but the Plaintiffs are allowed to proceed against the American Bankers Defendants, any judgment rendered against the American Bankers Defendants in the State Court may bind them as well when the American Bankers Defendants litigate their indemnification claim in Delaware Bankruptcy Court. In addition to the indemnification claim, the Defendants maintain that the State Court Action is closely tied to the Oakwood Debtors' bankruptcy in that the American Bankers Defendants have filed an adversary proceeding to have the automatic stay apply to them as the Oakwood Debtors' co-defendants in the State Court Action. The Defendants also contend that the Delaware Bankruptcy Court may be able to decide Plaintiffs' claims more quickly by adopting certain ADR procedures that the Debtors have proposed.
To further support their opposition to Plaintiffs' motion to remand or abstain, Defendants maintain that it is potential prejudice to involuntarily removed defendants that the Court should consider rather than prejudice to involuntarily removed plaintiffs. Because the Defendants consent to removal of the State Court Action, *385 Defendants assert that this factor does not support abstention or remand. Defendants further maintain that the predominance of state law as well as comity concerns do not weigh in favor of abstention or remand because bankruptcy judges routinely decide state law issues, and those presented by Plaintiffs in the State Court Action are not novel or complex and do not involve unsettled areas of state law. Defendants also point out that the Plaintiffs' have sued under North Carolina and Florida law as well as Arkansas law. Finally, Defendants contend that the presence of non-debtor co-defendants (i.e., the American Bankers Defendants) does not warrant abstention or remand because the dispute is not strictly between non-debtor parties in that Plaintiffs' claims against American Bankers are "inextricably intertwined" with the Plaintiffs' claims against the Oakwood Defendants because the allegations against the American Bankers Defendants are premised upon actions taken by various employees of the Oakwood Defendants who were allegedly acting within the scope of their employment.
Court's Findings
The Court finds that nearly all the factors to be considered in connection with a motion for discretionary abstention and equitable remand weigh in favor of abstaining from and remanding the State Court Action back to State Court. A related proceeding has been commenced in State Court in which state law issues clearly predominate over bankruptcy issues (in fact, there are no bankruptcy issues in the State Court Action); there is no jurisdictional basis for the lawsuit in federal court other than § 1334; the State Court Action, while related to the main bankruptcy case, is not a core proceeding in bankruptcy; the state law claims may be decided in State Court with enforcement left to the bankruptcy court (see discussion above regarding determination of liability versus liquidation of claims); the Plaintiffs have requested a jury trial; and remand lessens the possibility of inconsistent results, especially in light of the pending State Court appeal and prior rulings made by the State Court. Furthermore, as already set forth in this Order, the Delaware Bankruptcy Court's large caseload weighs in favor of allowing the State Court to decide the lawsuit in that it may be decided more quickly and lessen the burden on the Delaware Bankruptcy Court's docket. Additionally, although the Defendants argue otherwise, the presence of non-debtor parties in the State Court Action does not weigh in favor of either Plaintiffs or Defendants in this case as the Delaware Bankruptcy Court has already decided not to impose an automatic stay on the American Bankers Defendants, and has indicated that the automatic stay will probably be lifted with respect to the Oakwood Defendants once their chapter 11 plan is confirmed. In other words, the lawsuit may proceed in State Court regardless of the Debtors' bankruptcy filing, and accordingly, the fact that there are non-debtor defendants does not impact the Court's decision as to remand and abstention. Likewise, the Court finds that the difficult or unsettled nature of the applicable law and the originating court's expertise does not weigh in favor of either party in this case.
Having analyzed a number of the factors relevant to discretionary abstention and equitable remand, the Court turns to those factors most contested by the parties. The Defendants rely heavily on the potential effect that the State Court Action may have on the Oakwood Defendants' bankruptcy case and the American Bankers Defendants' indemnification claim. The Court has already addressed why this argument is unpersuasive. In sum, the debtor's liability may be determined by *386 another court (as can indemnification issues if raised there), and the claims allowance process in bankruptcy will simply determine how the claim is liquidated; the case need not be re-tried, and in fact, provided the Delaware Bankruptcy Court lifts the automatic stay with respect to the Oakwood Defendants, principles of res judicata will prevent the case from being re-litigated in Delaware. Additionally, the Court agrees with Plaintiffs that the faster resolution of the case in Arkansas will have a positive impact on the administration of the Oakwood Defendants' bankruptcy cases. For the same reasons, the Court finds that remanding the case to State Court will best serve principles of judicial economy.[10] The Court has already determined that the American Bankers' claim does not transform the State Court Action into a core proceeding in the Oakwood Debtors' bankruptcy cases; for the same reasons, the same issues do not have to be decided by the Delaware Bankruptcy Court, and accordingly, it does not follow that it will serve judicial economy to have the Delaware Bankruptcy Court start over and try the State Court Action, especially where the State Court Action has been pending for over two years and substantial litigation has taken place.
The Court also finds that due to the Plaintiffs' presence in Arkansas and the amount of litigation that has taken place in the State Court Action, having the case heard in the Delaware Bankruptcy Court would undoubtedly amount to significant prejudice to Plaintiffs. The Court rejects the Defendants' assertions that the Court should only consider potential prejudice to involuntarily removed Defendants. The argument is presented without rationale and support, and the Court is at a loss to supply one.
Finally, the Court finds that one factor weighs overwhelmingly in favor of Plaintiffs: the likelihood that the commencement of the proceeding involves forum shopping by one of the parties. The facts of this case reveal that the Defendants are clearly trying to remove the action to obtain more favorable rulings. The Defendants have lost on the issue of whether an ADR agreement is binding and that issue is pending on appeal; by attempting to have the case heard by the Delaware Bankruptcy Court, Defendants attempt to bypass the State Court's ruling on this issue and nullify the pending appeal before the Arkansas Supreme Court. The Defendants even argue that the case may be tried more quickly in Delaware because they have proposed ADR procedures to resolve disputes there. Clearly, the Defendants seek to have the dispute resolved by ADR by putting the lawsuit into a new forum.
In sum, application of the factors set forth in applicable case law to the facts of this case clearly show that both discretionary abstention and equitable remand dictate that the State Court Action be remanded to State Court. Moreover, even if the Plaintiffs had failed to prove every element required for mandatory abstention under § 1334(c)(2), most of those elements were undoubtedly met, and accordingly, discretionary abstention is appropriate under § 1334(c)(1). See Titan Energy, Inc., 837 F.2d at 333 n. 14.
*387 VENUE
Given the Court's determination that mandatory and discretionary abstention as well as equitable remand are proper in this case, the Court need not decide the Motion to Transfer filed by the Defendants. However, as an alternative ruling, the Court concludes that regardless of the propriety of abstention and remand in this case, the District of Delaware is not the proper venue for this case.
Legal Standard: § 1412
Transfer of an adversary proceeding in bankruptcy to another district is governed by 28 U.S.C. § 1412 and Bankruptcy Rule 7087 which provide:
A district court may transfer a case or proceeding under Title 11 to a district court for another district, in the interest of justice or for the convenience of the parties.
28 U.S.C. § 1412.[11]
On motion and after a hearing, the court may transfer an adversary proceeding or any part thereof to another district pursuant to 28 U.S.C. § 1412, except as provided in Rule 7019(2).[12]
Fed. R. Bankr.Pro. 7087.
The Court has discretion to grant or deny a motion to change venue. See Alliant Health Mgmt. Services, Inc. v. Vital Link Private Duty Lodi, Inc. (In re Vital Link Lodi, Inc.), 240 B.R. 15, 19 (Bankr.W.D.Mo.1999) (citing United States v. Phillips, 433 F.2d 1364, 1368 (8th Cir.1970)). The party wishing to transfer venue has the burden to prove by a preponderance of the evidence that the proceeding should be transferred. See id. (citing Wittes v. Interco, Inc. (In re Interco, Inc.), 139 B.R. 718, 720 (Bankr.E.D.Mo.1992)). In ruling on motions to transfer venue, courts have considered various factors to determine whether a change in venue is in the "interest of justice" or the "convenience of the parties." The Defendants urge the Court to apply the factors listed in In re Vital Link Lodi, Inc., 240 B.R. at 19 (citations omitted) which include: the proximity of the creditors to the other court; the proximity of the debtor to the other court; the proximity to the other court of witnesses necessary to the administration of the estate; the location of the debtor's assets; the economic administration of the bankruptcy estate; the relative advantages and obstacles to a fair trial; the economic harm to the debtor in changing venue; and the inability of a party to defend in the new forum. In re Vital Link Lodi, Inc. also emphasized the strong presumption in favor of transferring the case to the home court (i.e., the bankruptcy court where the debtor's bankruptcy case is pending). Plaintiffs rely on the factors set forth in *388 A.B. Real Estate, Inc. v. Bruno's Inc. (In re Bruno's, Inc.), 227 B.R. 311, 324-25 (Bankr.N.D.Ala.1998). Having considered the factors set forth in both In re Vital Link Lodi, Inc. and In re Bruno's, Inc., the Court concludes that the In re Bruno's, Inc. factors are more comprehensive and take into account the convenience of all parties rather than just the debtor's and parties to the debtor's bankruptcy case. Having reviewed those factors, this Court adopts the factors set forth by the Bankruptcy Court for the Northern District of Alabama in In re Bruno's, which are as follows:
Factors Relevant to "Interest of Justice" Prong of § 1412:
(1) economics of estate administration;
(2) presumption in favor of the "home court";
(3) judicial efficiency;
(4) ability to receive a fair trial;
(6) the state's interest in having local controversies decided within its borders, by those familiar with its laws;
(7) enforceability of any judgment rendered; and
(8) plaintiff's original choice of forum.
Factors Relevant to "Convenience of Parties" Prong of § 1412:
(1) Location of the plaintiff and defendant;
(2) Ease of access to necessary proof;
(3) Convenience of witnesses;
(4) Availability of subpoena power for the unwilling witnesses; and
(5) Expense related to obtaining witnesses.
In re Bruno's, Inc., 227 B.R. at 324-25.
Defendants' Arguments
In support of transfer to the Delaware Bankruptcy Court, Defendants rely heavily on the strong presumption in favor of the home court. Specifically, the Defendants point out that the creditors holding the largest unsecured claims are not located in Arkansas, but in New York and Minnesota; the Oakwood Debtors' principal places of business are in North Carolina, and accordingly, their books, records and executives are closer to Delaware than Arkansas. Again, the Defendants argue that transferring the State Court Action to Delaware is essential to the efficient administration of the Oakwood Debtors' bankruptcy estates, asserting that waiting on resolution of the State Court Action in Arkansas would result in delay of the administration of the Oakwood Debtors' bankruptcy estates. The Defendants also argue that the Oakwood Debtors' willingness to transfer the case to Delaware as evidenced by their joinder to the American Bankers' motion to transfer means that transfer will be more efficient for the bankruptcy estates. Finally, without additional discussion, the Defendants assert that no prejudice will result from transfer because the State Court Action involves causes of action under North Carolina and Florida law as well as Arkansas law.
Plaintiffs' Arguments
The Plaintiffs argue that transfer is not in the "interest of justice," and that the Defendants have failed to prove that the continuation of the State Court Action in Arkansas will impact the Oakwood Debtors' bankruptcies, delay the Oakwood Debtors' reorganization or result in higher litigation costs. On the other hand, Plaintiffs argue that they will incur substantial additional costs if the lawsuit is tried in Delaware due to increased travel costs and fees for local counsel. Plaintiffs also argue that the presumption in favor of transferring actions to the "home court" is not the only factor to be considered, and that Defendants must show that other reasons support a change in venue as well. With respect to judicial efficiency, the Plaintiffs *389 again assert that the State Court's familiarity with and administration over the State Court Action over the past two years make it the more efficient court to try the case. Plaintiffs also request that the Court take judicial notice of the Delaware Bankruptcy Court's caseload in connection with this factor. The Plaintiffs argue that their demand for a jury trial dictates that the action remain in Arkansas to allow Arkansas citizens to decide the case which arose in Arkansas and is being brought under Arkansas law. Plaintiffs contend that the location where a judgement is entered, if any, will not impact collection, but that they will file a proof of claim in the Oakwood Debtors' bankruptcy cases if they are allowed to proceed against the Oakwood Debtors in Arkansas Court (i.e., if the automatic stay is lifted by the Delaware Bankruptcy Court). Finally, citing In re Bruno's, Inc., the Plaintiffs argue that the Defendants have failed to meet their burden of proof to transfer venue under the interests of justice prong, and accordingly, the plaintiff's original choice of forum must be respected.
With respect to the "convenience of parties" prong, Plaintiffs argue that all the convenience factors outlined in In re Bruno's, Inc. weigh in favor of denying Defendants' motion to transfer. Specifically, the Plaintiffs point out that they are Arkansas residents as are the witnesses they intend to call, including some of Defendants' former employees who reside in Arkansas and cannot be compelled to testify in Delaware. Plaintiffs have no information about the witnesses that Defendants intend to call, but contend that since the Defendants' principal places of business are in North Carolina, they are not in Delaware and neither are their documents or other proof that may be subject to discovery. In sum, the Plaintiffs argue that transferring the case to Delaware will result in a hardship to Plaintiffs due to the additional expense, delay and ability to try their case there.[13]
Court's Findings
The Court finds that it is neither in the interests of justice or convenience of the parties to transfer the State Court Action to the Delaware Bankruptcy Court. The Defendants did not offer proof with respect to these factors other than the following uncontroverted facts: the Defendants' principal places of business are in North Carolina; the Oakwood Debtors are in bankruptcy in Delaware; and the American Bankers Defendants have filed a proof of claim in the Oakwood Debtors' bankruptcy cases. The Court has already found that allowing the State Court Action to continue in Arkansas State Court should have a minimal effect on the Oakwood Debtors' bankruptcy cases in that once liability, if any, is determined by the State Court, the claim may be liquidated by the Delaware Bankruptcy Court in the normal course of the Oakwood Debtors' bankruptcy cases. Likewise, the Court has already held that judicial economy is better served by allowing the State Court Action to continue in Arkansas State Court. It will clearly be more inconvenient to Plaintiffs to try the case in Delaware than it will be for Defendants who have already been trying this case in Arkansas for two years notwithstanding the Defendants' uncontested proof that they are closer to Delaware geographically than Plaintiffs. Additionally, the Defendants' reliance on convenience to themselves, and the Oakwood Debtors in particular, while ignoring the convenience to the Plaintiffs, is not persuasive. Even if the Court were to apply In re Vital Link Lodi, Inc.'s proximity to creditors test, the only creditors *390 relevant to removal of the State Court Action are the Plaintiffs and the American Bankers, not the Oakwood Debtors' forty largest unsecured creditors. "Furthermore, where the movant only shows that inconvenience will merely be shifted from one party to another, the court should deny the change of venue motion." In re Bruno's, Inc., 227 B.R. at 325 (citations omitted). For these reasons, the Defendants have failed to prove any basis for a change in venue other than the presumption in favor of the home court, and accordingly, the Plaintiffs' original choice of forum must be respected such that the Defendants' Motion to Transfer is denied.
CONCLUSION
The Court concludes that it is compelled to remand the State Court Action to Arkansas State Court under principles of mandatory abstention, discretionary abstention and equitable remand. Additionally, even if the Court were not to abstain and remand, the Defendants have failed to show that a change in venue to the Delaware Bankruptcy Court is appropriate in this case. For these reasons, it is hereby
ORDERED that the Plaintiffs' Motion for Remand of State Court Civil Action and for Abstention is GRANTED, and this cause is hereby REMANDED to the Saline County Circuit Court; it is further
ORDERED that the Defendants' Motion to Transfer to the United States Bankruptcy Court for the District of Delaware is DENIED.
NOTES
[1] All references to rules in this order refer to the Federal Rules of Bankruptcy Procedure unless otherwise indicated.
[2] The Court has reviewed the transcript from the March 27, 2003 hearing and takes judicial notice of the Delaware Bankruptcy Court's ruling. "Many circuit courts have held that federal courts have the authority to take judicial notice of proceedings in other courts, either within or without the federal system, provided those proceedings are directly related to the matters presently at issue." See Allegheny, Inc. v. Basic Packaging Systems, Inc. (In re Allegheny), 86 B.R. 466 (Bankr.W.D.Pa.1988) (citations omitted).
[3] Specifically, the Delaware Bankruptcy Court stated," . . . if this case is on track for confirmation within the next 90 days, then it seems to me that in all probability any stay that exists, including the stay as to the debtors, should probably, I won't say will be, should probably be lifted at that point." Transcript, page 34.
[4] Filing the notice of removal in the Bankruptcy Court rather than the District Court is proper under Local Rule 83.1(c) of the United States District Court for the Eastern District of Arkansas which provides for referral of all cases and proceedings arising under, arising in, or related to bankruptcy cases, and requires that papers in those cases be filed with the Bankruptcy Clerk. See also 28 U.S.C. § 157(a); Specialty Mills, Inc. v. Citizens State Bank, 51 F.3d 770, 773 n. 4 (8th Cir.1995).
[5] While this Court may hear non-core proceedings, it must submit its proposed findings of fact and conclusions of law to the district court for review and entry of final order (unless all parties consent to the Court's entry of a final order in a non-core proceeding). See 28 U.S.C. § 157(c); Rule 9033; Local Rule 83.1(b) of the United States District Court for the Eastern District of Arkansas.
[6] The Defendants assert that no distinction should be made between the three types of bankruptcy jurisdiction, but that all lawsuits affecting the bankruptcy estate should be litigated in one forum, the bankruptcy court. In fact, a determination of which class of bankruptcy jurisdiction applies to the underlying case is essential because the type of jurisdiction impacts whether the case is a core or non-core proceeding under 28 U.S.C. § 157 which in turn impacts the analysis of abstention (both mandatory and discretionary) and remand.
[7] The Engra court also notes that 28 U.S.C. § 1409 which governs proper venue for commencement of bankruptcy proceedings dictates that certain bankruptcy proceedings be filed in certain districts even if the bankruptcy case itself is not pending those districts. 86 B.R. at 893.
[8] The Court may take judicial notice of facts that are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b); Fed. R. Bankr.Pro. 9017 (incorporating Federal Rules of Evidence).
[9] The Bankruptcy Judgeship Act of 2003, introduced as H.R. 1428, is a bill containing 36 bankruptcy judgeship positions recently authorized by the Judicial Conference.
[10] Both Plaintiffs and Defendants cite and discuss a number of cases as examples of removals being uneconomical or economical use of judicial resources. Because each of these cases can be factually distinguished in some way, the Court does not rely on those cases in its analysis and decision. Rather, the Court focuses on the facts before it and whether judicial economy is better served by remanding the case to State Court or allowing it to remain in bankruptcy court.
[11] Some courts hold that the general venue statute, 28 U.S.C. § 1404, applies to cases which are only "related to" a bankruptcy case as opposed to proceedings arising in or under a bankruptcy case. See Searcy v. Knostman, 155 B.R. 699, 706-707 (S.D.Miss.1993) (holding that "related to" proceedings are governed by general change of venue statute for all civil actions). However, due to the similarity between §§ 1404 and 1412, several courts have concluded that there is no reason to distinguish between the two statutes. See e.g., Thomson McKinnon Securities, Inc. v. White (In re Thomson McKinnon Securities, Inc.), 126 B.R. 833, 834-35 (Bankr.S.D.N.Y.1991) (quoting In re Spillane, 884 F.2d 642, 645 n. 6 (1st Cir.1989)). Because there is no substantive difference between the two, and for the additional reasons set forth in A.B. Real Estate, Inc. v. Bruno's Inc. (In re Bruno's, Inc.), 227 B.R. 311, 322-323 (Bankr.N.D.Ala.1998), this Court applies § 1412 to the transfer of proceedings pending in the bankruptcy court.
[12] Rule 7019 implements Civil Rule of Procedure 19 regarding joinder of necessary parties with certain exceptions applicable to bankruptcy proceedings.
[13] However, both parties admit that they can receive an impartial trial in either court.
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989 F. Supp. 1237 (1997)
ADVANCED CARDIOVASCULAR SYSTEMS, INC., Plaintiff,
v.
SCIMED LIFE SYSTEMS, INC., Defendant.
No. C-95-03580.
United States District Court, N.D. California.
November 12, 1997.
*1238 *1239 *1240 Richard H. Abramson, Hope L. Hudson, Heller Ehrman White & McAuliffe, Palo Alto, CA, Edward A. Mas, Timothy J. Malloy, Gregory J. Vogler, David D. Headrick, James M. Hafertepe, Leland G. Hansen, Eligio C. Pimentel, Stephen H. Bean, Alejandro Menchaca, McAndrews Held & Malloy, Chicago, IL, for Plaintiff.
Kenneth E. Keller, Bronson Bronson & McKinnon, San Francisco, CA, Philip S. Johnson, Steven B. Samuels, Steven J. Rocci, Barbara L. Mullin, Kevin M. Flannery, Henrik D. Parker, David R. Bailey, Woodcock Washburn Kurtz Mackiewicz & Norris, Philadelphia, PA, David Eiseman, Quinn Emanuel Urquhart Oliver & Hedges LLP, Palo Alto, CA, for Defendant.
ORDER
JENSEN, District Judge.
On October 22, 1997, the Court heard argument on SciMed's motion for leave to amend its first amended answer, ACS's counter-motion for judgment on the pleadings against SciMed's First, Third, Fourth, Fifth, Sixth and Seventh defenses, and SciMed's counter-motion for a stay. David Eisman, Henrik Parker, and Philip Johnson appeared on behalf of SciMed; David Headrick, Leland Hansen and Edward Mas II appeared for ACS. Having considered the arguments of counsel, the papers submitted, the applicable law, and the record in this case, the Court hereby GRANTS SciMed's Motion for Leave to Amend, DENIES ACS's Counter-Motion except that the Court strikes SciMed's Fourth Defense, and DENIES SciMed's Contingent Counter-Motion for a stay.
I. BACKGROUND
A. Factual Background and Procedural History
Advanced Cardiovascular Systems, Inc. ("ACS") and SciMed Systems, Inc. ("SciMed") are companies engaged in developing, manufacturing, promoting, and selling interventional medical devices, including rapid exchange catheters used in percutaneous transluminal coronary angioplasty ("PTCA") for treating coronary artery disease.[1] ACS filed the present action[2] against SciMed on October 10, 1995, alleging infringement of the '548, '273, '233 and '395 patents, all of which were issued to Dr. Paul G. Yock between August 20, 1990 and September 19, 1995. Plaintiff alleges that SciMed's "Express Plus" and "Express Plus II" rapid exchange PTCA catheters infringe on the named patents. On December 6, 1995, ACS filed an amended complaint. The Court denied SciMed's motion to dismiss the amended *1241 complaint on May 13, 1996. In that Order, the Court rejected SciMed's argument that ACS lacked standing to bring suit on the Yock patents.
SciMed filed its first amended answer on June 21, 1996. The answer asserted nine affirmative defenses. In its September 6, 1996 Order, this Court struck with prejudice SciMed's Ninth Defense (that ACS should be estopped from enforcing the '395 or '233 patents based on delay in prosecution).
In March 1997, the parties stipulated to proceed in conformity with the proposed Local Rules of Practice in Patent Cases. Pursuant to the deadlines contained in the March 10, 1997 stipulation and order, ACS provided SciMed with a pleading setting forth the asserted claims of the Yock patents on February 28, 1997. On April 18, 1997, ACS was served with SciMed's Initial Disclosure of Prior Art which set forth the bases for the asserted claims of invalidity of the Yock patents.
On July 23, 1997, SciMed filed a motion for leave to amend its first amended answer. SciMed's second amended answer would add new defenses of invalidity based on obviousness and anticipation and unenforceability based on inequitable conduct before the U.S. Patent Office.
On August 18, 1997, ACS filed an opposition to defendant's motion as well as a counter-motion for judgment on the pleadings as to certain of SciMed's affirmative defenses. In addition to arguing that SciMed unduly delayed in raising its defenses, ACS's opposition argues that previous settlement agreements and consent judgments in related litigation have a preclusive effect on SciMed's proposed amended defenses. ACS argues that principles of claim and issue preclusion render SciMed's amendments futile.
In response, on September 8, 1997, SciMed filed a contingent counter-motion to stay pending arbitration. In its counter-motion, SciMed contends that, if denying its motion for leave to amend its answer would be based on interpretation of the earlier agreements between the parties, arbitration would be the proper forum in which to seek interpretation of those agreements.
B. Legal Standards
1. Leave to Amend
Federal Rule of Civil Procedure 15 governs the amendment of pleadings. The rule provides that, aside from amendment of right as provided in the Rule, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). This rule reflects an underlying policy that disputes should be determined on their merits, and not on the technicalities of pleading rules. See Foman v. Davis, 371 U.S. 178, 181-82, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962). Accordingly, the court must be very liberal in granting leave to amend a complaint. Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990) (leave to amend granted with "extreme liberality"); Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir.1989); Genentech, Inc. v. Abbott Laboratories, 127 F.R.D. 529, 530 (N.D.Cal.1989) (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir.1987)).
Once a party seeking leave to amend has given a legitimate reason for amendment, the burden shifts to the party opposing amendment to demonstrate why leave to amend should not be granted. Genentech, 127 F.R.D. at 530-31 (citing Senza-Gel Corp. v. Seiffhart, 803 F.2d 661, 666 (Fed.Cir.1986)); William W. Schwarzer et al., Federal Civil Procedure Before Trial, § 8:415, at 8-75 (1991). There are several accepted reasons why leave to amend should not be granted, including the presence of bad faith on the part of the plaintiff, undue delay, prejudice to the defendant, futility of amendment, and that the party has previously amended the relevant pleading. See Ascon Properties, 866 F.2d at 1160; McGlinchy v. Shell Chemical Co., 845 F.2d 802, 809 (9th Cir.1988). The court has the discretion to determine whether the presence of any of these elements justifies refusal of a request to amend the pleading.
2. Judgment on the Pleadings
Under Federal Rule of Civil Procedure 12(c),
*1242 After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
"All allegations of fact by the party opposing [judgment as a matter of law] are accepted as true, and are construed in the light most favorable to that party." General Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir.1989).
Rule 12(c) itself and supporting case law indicate that if matters outside the pleadings are presented to and not excluded by the court, the motion for judgment on the pleadings is converted into a Rule 56 summary judgment motion. See Schwarzer, supra, § 9:339; Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir.1989). The fact that such extrinsic material was submitted to the court does not automatically convert a motion for judgment on the pleadings into one for summary judgment. It must appear that the court relied on the extrinsic evidence in reaching its conclusions before that conversion occurs. Homart Dev. Co. v. Sigman, 868 F.2d 1556 (11th Cir.1989).
II. ARGUMENTS
A. Res Judicata and Collateral Estoppel
1. The 1991 Settlement between ACS and SciMed
In August and October of 1991, ACS filed two suits against SciMed for patent infringement. ACS alleged that SciMed's EXPRESS catheter infringed the Yock '548 and '273 patents. In December 1991, ACS and SciMed entered into a settlement agreement and stipulated to dismissal of the action with prejudice. Under the terms of the settlement agreement, SciMed paid ACS $48 million and agreed to pay ACS a 20% royalty for a two-year license to phase out the EXPRESS catheter.
The Settlement Agreement contains the following provision that is relevant to the parties' dispute in the present case:
Mutual Release: ... each of ACS/Lilly and SciMed ... hereby releases and discharges the other parties ... from any and all manner of debts, claims, demands, damages, liabilities, obligations, causes of action (including, without limitation those asserted in the Complaints, Answers and Counterclaims and any proposed Amended Answer and Counterclaim in the litigation), agreements, suits, sums of money, obligations and rights whatsoever, whether known or unknown, suspected or unsuspected, at law or in equity, which are based on actions or inaction occurring prior to the effective date of this Agreement and which each party now owns or holds, or at any time heretofore owned or held, by reason of any act, matter, cause of thing whatsoever.
ACS Exh. 3 (Settlement Agreement) at 15-16. Pursuant to this settlement agreement, the Court entered a Stipulated Order of Dismissal on January 9, 1991. ACS Exh. 4 (Order of Dismissal).
2. The 1994 Settlement Between ACS and BSC
In May of 1994, ACS filed a cause of action for patent infringement alleging that the SYNERGY catheter manufactured by Boston Scientific Corporation ("BSC") infringed the same '548 and '273 Yock patents.[3] In September 1994, ACS and BSC settled this action. Pursuant to the ACS/BSC Settlement Agreement, the parties agreed to entry of a Stipulation and Consent Judgment that provides in pertinent part:
The Court being fully apprised of the facts underlying the claims by the presentations and representations by counsel, this Court hereby states and orders as follows:
...
*1243 2. The patents in suit, U.S. Letters Patents Nos. 5,061,273 (the "'273 patent") and 5,040,548 (the "'548 patent") are not invalid, are enforceable, are owned by Dr. Paul Yock, and are exclusively licensed to ACS.
ACS Opp., Exh. 5 (Consent Judgment). In accordance with the settlement, BSC paid ACS $1 million and agreed to pay a 30% royalty for a limited two-year license to phase out its SYNERGY catheter.
3. Claim preclusion
General principles of res judicata apply to issues of patent validity and enforcement. Foster v. Hallco Mfg. Co., 947 F.2d 469, 475 (Fed.Cir.1991). "The general concept of claim preclusion is that when a judgment is rendered in favor of a party to litigation, the plaintiff may not thereafter maintain another action on the same "claim," and defenses that were raised or could have been raised by the defendant in that action are extinguished." Id. at 478 (citing Restatement (Second) of Judgments, §§ 18, 19 & comments). ACS argues that under the doctrine of claim preclusion, SciMed cannot raise invalidity or unenforceability of the '273 or '548 patents as a defense, since these defenses were raised or could have been raised by SciMed in the previously settled litigation.
In Foster, the Federal Circuit considered whether a claim of patent invalidity was precluded because of a previous consent judgment involving the same patent, but a different allegedly infringing technology. While holding that consent judgments may be entitled to claim preclusion, the court ruled that claim preclusion can apply only where the prior suit between the parties was on the same cause of action. See id. at 480. The court explained that "for claim preclusion to apply ..., the devices in the two suits must be essentially the same." Id. at 479-80.[4] This is because the essential facts of a patent infringement claim the "cause of action" for claim preclusion purposes "is the structure of the device or devices in issue." Id. at 479. Moreover, the court pointed out that it is the proponent of claim preclusion who bears the burden of showing that the cause of action in the two suits was the same. Id. at 480.
SciMed relies on Foster for the proposition that claim preclusion is inappropriate where the subsequent case involves a different allegedly infringing technology. SciMed argues that the EXPRESS PLUS/II catheters at issue in the instant case are significantly distinct from the EXPRESS catheter at issue in the 1991 litigation between ACS and SciMed. Specifically, SciMed notes that the EXPRESS catheter has two lumens at its distal end while the EXPRESS PLUS/II catheters have a single lumen. Furthermore, the single lumen shaft portion of the EXPRESS PLUS/II catheters has dual seals so that it can seal onto the guidewire. In contrast, the lumen shaft portion of the EXPRESS catheter could not seal onto the guidewire. According to SciMed, these changes prevent the products from being considered "essentially the same," and therefore prevent the application of claim preclusion in the instant litigation.
ACS does not carry its burden under Foster of showing that the infringing devices in the two suits are essentially the same.[5]*1244 ACS's entire argument in this regard is found in a footnote in its opposition to SciMed's Motion for Leave to Amend. In that footnote, ACS points out that the products at issue "are not meaningfully different in the context of the Yock patents." ACS's Opp. at 10 n. 4. To support this assertion, ACS asserts that the catheters all have relatively long guidewire lumens designed to provide increased pushability and prevent kinking and other malfunctions. Id. This one reference to a similarity between the products does not satisfy ACS's burden to demonstrate that the products are essentially the same. Accordingly, if Foster controls, claim preclusion would not bar SciMed from asserting defenses of invalidity and unenforceability.
ACS argues that Foster misapplied the Ninth Circuit's approach to res judicata. In Foster, the court "[took] into consideration the law of the regional circuit, here the Ninth, on the application of general principles of res judicata with respect to a consent judgment." Id. at 477 n. 7. The court proceeded under the assumption that the Ninth Circuit and Federal Circuit did not significantly differ in their approaches. Id. ACS contends that the Ninth Circuit approach differs from the approach utilized in Foster. Indeed, to the extent that the Federal Circuit and the Ninth Circuit disagree on the appropriate test for claim preclusion, this Court would be obligated to follow the Ninth Circuit approach, since general principles of res judicata are nonpatent matters over which 28 U.S.C. § 1295(a)(1) does not afford the Federal Circuit exclusive jurisdiction. See Hartley v. Mentor Corp., 869 F.2d 1469, 1471 n. 1 (Fed.Cir.1989).
The parties dispute whether Foster followed the appropriate standard for determining claim preclusion in the Ninth Circuit. ACS cites Robertson v. Isomedix, Inc. (In re International Nutronics, Inc.), 28 F.3d 965, 970 (9th Cir.1994), and C.D. Anderson & Co. v. Lemos, 832 F.2d 1097, 1100 (9th Cir.1987), to show that the Ninth Circuit considers the following four factors in determining whether successive suits involve the same cause of action:
(1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts.
ACS points out that Foster only dealt with the fourth factor in concluding that preclusion would be appropriate only if the devices at issue in the two actions were essentially the same. ACS argues that this exclusive focus on the fourth factor was inconsistent with Ninth Circuit law which the Federal Circuit claimed to be applying. SciMed counters that the Federal Circuit's focus in Foster on the similarity, or lack thereof, between the devices in the two lawsuits was entirely consistent with Ninth Circuit's approach to claim preclusion. Indeed, in Western Systems, Inc. v. Ulloa, 958 F.2d 864, 871 (9th Cir.1992) (citing Restatement (Second) Judgments § 24(1)), the Ninth Circuit wrote that "[t]he test for whether a subsequent action is barred is whether it arises from the same `transaction, or series of transactions as the original action.'" As ACS acknowledges, the same transaction factor is generally considered the most important. Plaintiff's Opp. to Leave to Amend at 7:7-8 (citing C.D. Anderson & Co. v. Lemos, 832 F.2d 1097, 1100 (9th Cir.1987)). Accordingly, it appears that Foster's focus on the same transaction factor was consistent with Ninth Circuit law.
Even assuming that Foster should have addressed each of the four factors identified in C.D. Anderson, ACS's suggestion that Foster would have reached a different result under this four factor approach is unpersuasive. Foster linked patent validity issues in the initial litigation to the particular infringing device. Foster would not have found that the two suits involved "infringement of the same right" where the rights were asserted in the context of two different devices. Similarly, the Court would not have found that "the rights established in the prior judgment would be ... impaired by prosecution of the second action," because the right is defined, under Foster, in relation to a particular infringing device. Under these circumstances, *1245 consideration of the additional factors identified in C.D. Anderson would not have altered the conclusion of Foster.
This Court rejects the argument that Foster incorrectly applied Ninth Circuit claim preclusion principles and finds that Foster controls the application of claim preclusion in the instant case. Under Foster, the fact that the validity or unenforceability of the '548 and '273 patents was raised or could have been raised as a defense in previous litigation between the parties does not preclude SciMed from asserting invalidity or unenforceability defenses to these patents in the context of different accused devices.
4. Issue Preclusion
Ordinarily, an issue must be fully litigated before the resolution of that issue will be conclusive in a subsequent action between the same parties. However, "there has come into existence a form of issue preclusion in connection with consent judgments that is not dependent on actual litigation of the matter." Foster, 947 F.2d at 480 (citing Restatement (Second) of Judgments, § 27 comment (e) and note at 269). The preclusive effect results not from the fact of an issue having been fully litigated, but instead from "an agreement manifesting an intention to be bound." Id. "Thus, if a consent judgment, by its terms, indicates that the parties thereto intend to preclude any challenge to the validity of a particular patent, even in subsequent litigation involving a new cause of action then that issue can be precluded." Id. at 480-81. Adopting the Restatement's position, Foster held that "provisions in a consent judgment asserted to preclude litigation of the issue of validity in connection with a new claim must be construed narrowly." Id. at 481.
The court applied these principles to the consent decree at issue in Foster. In Foster, the original consent decree stated that the '760 and '587 patents "are owned by plaintiffs and are valid and enforceable in all respects." Id. at 472. About four years after entry of this judgment, Hallco, the defendant in the initial action, began producing a new product for which it refused to pay royalties to Foster. Id. at 472-73. Hallco filed a action seeking a declaration that the '760 and '587 patents were invalid, in response to which Foster raised the defense of issue preclusion. Under these facts, the court concluded that the language of the consent decree at issue was ambiguous with regard to barring the defense of patent invalidity in future actions involving other accused devices. Id. at 482. Rather than consider extrinsic evidence of the parties intent, the court remanded the case to the district court to determine the intent of the parties. Id. at 482.
The consent judgment in the instant case is not distinguishable from the consent decree considered in Foster. As with the consent decree in Foster, the ACS/BSC consent judgment simply states that the patents-in-suit are valid and enforceable. It does not state that the parties intended to preclude the litigation of validity and enforcement in relation to subsequent infringement claims. Thus the language of the consent judgment, which must be narrowly construed by this Court, is insufficient to support ACS's contention that the parties intended to preclude litigation of patent validity and enforcement in subsequent suits involving new accused devices.
The ACS/SciMed 1991 agreement is even less likely to have a preclusive effect under Foster. ACS points out that the parties entered into a broad release discharging all claims (including those asserted in answers and counterclaims) based on actions occurring prior to the effective date of the agreement. See ACS Exh. 3 (ACS/SciMed Settlement Agreement) at 15-16. For evidence of intent to preclude future challenges to validity and enforceability of the Yock patents, ACS looks to the Agreement's royalty provision. The royalty provision provides that SeiMed's obligation to pay royalties shall terminate upon final judgment of any court "in litigation between ACS and a third party" holding any of the Yock patent claims invalid or unenforceable.[6] ACS maintains that the *1246 reference to challenges by a third party demonstrates the parties' respective intent to preclude SciMed from challenging the Yock patents' validity and enforceability. While such language could indicate an understanding that SciMed would be precluded from future validity and enforceability challenges, the language by no means compels such an interpretation. This Court is not in a position to guess at the implications of the third party reference. Instead, the Court must narrowly construe the previous agreement in order to determine whether issue preclusion applies. See Foster, 947 F.2d at 481. With no explicit resolution of future challenges to validity and enforceability of the '273 and '548 patents, the 1991 ACS/SciMed agreement does not have an issue-preclusive effect upon the instant litigation.
B. SciMed's Motion for Leave to Amend
SciMed seeks to amend its answer in four respects. SciMed's second amended answer would (1) supplement SciMed's First Defense by alleging that claim 2 of the '233 patent is anticipated by the prior art under 35 U.S.C. § 102; (2) add a Ninth Defense that the patents-in-suit are invalid as being obvious in view of the prior art; (3) add a Tenth Defense that all four of the patents-in-suit are unenforceable due to inequitable conduct committed before the United States Patent and Trademark Office; and (4) add a counterclaim for declaratory judgment as to each affirmative defense. ACS argues in opposition that leave to amend should be denied for two reasons. First, ACS claims that the amendments are futile because of the preclusive effects of prior consent judgments. Second, ACS argues that SciMed unduly delayed in raising these defenses and therefore the amendments should be denied regardless of the preclusion issues.
1. Futility
ACS contends that SciMed's proposed amendments are futile because the new defenses are barred by res judicata and collateral estoppel. Futility of amendment can, by itself, justify the denial of a motion for leave to amend. Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir.1995). However, because the Court has determined that the prior consent judgments do not preclude SciMed from raising invalidity and unenforceability defenses, the amendments in question are not futile based on the doctrines of claim and issue preclusion.
2. Delay and Prejudice
Leave to amend may be denied where the movant delays amendment and the nonmoving party suffers prejudice from the delay. See Bonin, 59 F.3d at 845. ACS claims that SciMed has raised no new facts in its motion for leave to amend and has failed to explain its delay in seeking to amend. Furthermore, ACS claims that SciMed's undue delay in filing its motion to amend has prejudiced ACS.
a. Inequitable Conduct Defense
Prior to the issuance of the '548 and '273 patents at issue in this case, Patent Examiner Thaler had rejected Yock's applications for a '729 and a '200 patent. After receiving the first Office Actions with regard to the '729 and '200 applications, Yock and Edward Lynch, Esq., met with the Patent Examiner. At this interview, Yock presented a demonstration to the Examiner comparing an ACS RX catheter having a 25 cm guidewire lumen with a Schneider Monorail catheter having a 5 cm guidewire lumen. The purpose of the demonstration was to illustrate the greater pushability that results from a catheter with a longer guidewire lumen. Eight days after the interview, on March 15, 1991, Lynch filed Amendments in each of the '729 and '200 applications. The amendments identified the length of the guidewire lumen as "a distinguishing feature of the present invention." The '548 and '273 patents were subsequently issued.
SciMed contends that the demonstration mislead the Patent Examiner as to the importance of the length of the guidewire lumen. Specifically, SciMed argues that the performance difference between the two *1247 catheters in the demonstration was not entirely due to the length of the lumen as suggested by Yock and Lynch. Instead, the ACS RX catheter was constructed with a proximal shaft section that had been internally stiffened through the use of a steel rod. This aspect, which was not disclosed in the '729 or '200 applications, was designed to rectify problems of insufficient pushability. According to SciMed, the failure of Yock or Lynch to address this structural difference between the demonstrated catheters mislead the Examiner as to the significance of the design feature that led to the issuance of the '548 and '273 patents.
The parties dispute whether SciMed has unduly delayed in raising this inequitable conduct defense. SciMed states that it began its investigation into Dr. Yock's demonstration to the Examiner in preparation for its deposition of Lynch in April of 1997. SciMed contends that it promptly filed its motion for leave to amend after taking the deposition of Dr. Yock in which Yock confirmed Lynch's testimony that the Examiner was not informed of the steel rod in the ACS RX catheter's proximal shaft. ACS counters that all of the facts underlying the inequitable conduct claim were known long before the recent deposition of Dr. Yock. The Patent Office file histories contain information regarding the March 15, 1991 interview. These files were, according to ACS, undoubtedly read by SciMed as SciMed prepared to depose Dr. Yock and others regarding these patents in the 1991 litigation between ACS and SciMed. Furthermore, ACS argues that the deposition of Dr. Yock provided no new information regarding the interview. Instead, Yock simply responded that the information already gathered by SciMed from its deposition of Lynch three months earlier was a "perfectly fair summary." ACS argues that Yock's testimony cannot constitute new evidence justifying the timing of SciMed's motion to amend.
ACS cites Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir.1995), for the proposition that the Court should deny leave to amend "where the movant presents no new facts but only new theories and provides no satisfactory explanation for his failure to fully develop his contentions originally." This correct statement of the law, however, does not prevent amendment in the instant case. Unlike the movant in Bonin, SciMed does not seek to assert a new legal theory arising from otherwise pleaded facts. See Bonin, 59 F.3d at 846 (denial of leave to amend upheld where four of petitioners amended claims related to facts pleaded in original petition and others were duplicative or patently frivolous). Instead, SciMed seeks to amend to raise a new theory based on a new set of facts only recently confirmed by SciMed. Furthermore, because the legal theory implicates Federal Rule of Civil Procedure 9(b), requiring pleading of fraud with particularity, SciMed was entitled to confirm factual allegations before amending to include the inequitable conduct defense.
b. Invalidity Defenses
SciMed seeks to amend its answer to assert the invalidity of the subject patents on grounds of obviousness.[7] ACS was on notice of these defenses since SciMed provided ACS with SciMed's Prior Art Disclosure on April 18, 1997 pursuant to this Court's scheduling order. The disclosure sets forth the bases upon which SciMed asserts the invalidity of the Yock patents under 35 U.S.C. Sections 102 and 103. ACS does not dispute that the Prior Art Disclosure sets forth the bases for SciMed's invalidity defenses. Instead, ACS argues that this disclosure is not a substitute for amendment. According to ACS, SciMed has unduly delayed amending its claim regardless of whether the April disclosure put them on notice of these possible defenses. Yet it appears that ACS will suffer no prejudice from amendment given that ACS already knew of the facts and legal theory underlying these defenses. In light of the disclosure, ACS must have anticipated that these amendments would be forthcoming.
ACS's relies on Tenneco Resins, Inc. v. Reeves Bros., Inc., 752 F.2d 630 (Fed.Cir. *1248 1985) to support its position that SciMed should be denied leave to amend despite its Prior Art Disclosure. In Tenneco, the Federal Circuit affirmed a denial of leave to amend to add validity defenses. ACS points out that Tenneco rejected an accused infringer's argument that raising invalidity in a pretrial brief substituted for prompt amendment. ACS recites broad language from Tenneco such as the Federal Circuit's statement that "[a]t this late date, and after several opportunities foregone by [accused infringer] [the plaintiff's] burden of demonstrating prejudice is light." ACS's Combined Sur-reply at 23:7-10 (quoting Tenneco, 752 F.2d at 634).
The failure to amend promptly in Tenneco was significantly more egregious than the facts presented in the instant case. First, the amendments in Tenneco were proposed five years into the litigation. Id. at 634. This is a significantly greater delay than SciMed's filing of the present motion roughly two years into the litigation. Second, a dispute as to the relevance of a deposition question during the Tenneco litigation brought into focus the question of whether validity was at issue in the case. Id. at 635. At that time, plaintiff stressed that the accused infringer should amend its pleadings to assert invalidity before the witness would answer the validity related question. Id. Despite this disagreement, no amendment was filed for a year. Id. Based on this delay, the court concluded that the patentee "may well have assumed that [the accused infringer] had chosen to drop the matter and guided its litigation strategy accordingly." Id. Unlike the defendant in Tenneco, SciMed did not engage in conduct that would warrant ACS's assumption that SciMed did not intend to pursue these invalidity defenses. For these reasons, this Court finds Tenneco distinguishable from the instant case.
The Court concludes that SciMed's proposed amendments are neither futile nor prejudicial to ACS. Consistent with the liberal approach to amendments embodied in Federal Rule of Civil Procedure 15(a), the Court grants SciMed's motion for leave to amend its first amended answer.
C. ACS's Counter-Motion for Judgment on the Pleadings
ACS seeks judgment on the pleadings against SciMed's First, Third, Fourth, Fifth, Sixth and Seventh Defenses in SciMed's first amended complaint. With respect to the First, Fifth, Sixth and Seventh defenses, ACS argues that it is entitled to judgment on the pleadings based on the res judicata and collateral estoppel effects of the stipulated dismissal of prior litigation between ACS and SciMed and the stipulated consent judgment in prior litigation between ACS and Boston Scientific Corporation. ACS seeks judgment on the pleadings against SciMed's Third defense (lack of standing) and Sixth defense (unenforceability based on ACS's fraudulent conduct) on grounds that the Court's May 13, 1996 Order decided these issues against SciMed. Finally, ACS seeks judgment on the pleadings against SciMed's Fourth defense (failure to state a claim) because ACS has alleged the essential elements of patent infringement.
As an initial matter, SciMed argues that ACS's Counter-motion should be denied as untimely. Federal Rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Since no trial delay will result from resolution of ACS's motion,[8] the Court considers ACS's motion timely under Rule 12(c).
1. First, Fifth, Sixth and Seventh Defenses: Preclusion
ACS argues that it is entitled to judgment on the pleadings as to these four defenses because of the preclusive effects of the 1991 and 1994 settlements and consent judgments. As discussed above, the prior consent judgments do not preclude SciMed from raising invalidity and unenforceability defenses. Accordingly, ACS is not entitled to judgment on the pleadings based on its claim and issue preclusion arguments.
*1249 2. Third and Sixth Defenses: Lack of Standing
In its May 13, 1996 Order, this Court denied SciMed's motion to dismiss ACS's complaint for lack of standing. In so doing, the Court concluded that "ACS is the successor in title to the patent rights and has standing to bring this suit." Order at 13:1-2. SciMed's Third defense, filed after the May 13 Order as part of SciMed's First Amended Answer, asserts that ACS lacks standing to bring suit on the Yock patents.
The parties dispute whether the assertion in the Court's Order entitles ACS to judgment on the pleadings as to SciMed's standing defense. This Court's determination that ACS had standing must be limited to the context of that decision. "The question presented by a motion to dismiss is not whether a plaintiff will prevail in the action, but whether she is entitled to offer evidence in support of her claim." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974). The Court's Order did not definitively resolve the issue of standing. Instead, standing is a jurisdictional issue that SciMed can plead as a defense and reassert at a later time if facts surface that suggest a lack of standing.
Although the Court's previous order does not preclude SciMed from raising a lack of standing defense, the effect of the Order is that SciMed bears a considerable burden in prevailing on such a defense. On the record presented to the Court in the context of its previous decision, the Court concluded that ACS had standing to bring this action. SciMed will need to present significant new evidence to convince the Court that ACS lacks standing. Nevertheless, SciMed is not precluded from presenting such evidence by virtue of the Court's May 13, 1996 Order.
Similarly, the Court's May 13 Order does not preclude SciMed from asserting its Sixth defense. SciMed's Sixth defense asserts that the Yock patents should be held unenforceable because ACS fraudulently stated in its opposition to SciMed's motion to dismiss that ACS owned all substantial rights to the Yock patents. Again, the Court's Order did not resolve whether ACS in its opposition brief made fraudulent statements regarding patent ownership. Accordingly, ACS is not entitled to judgment on the pleadings as to SciMed's Sixth defense simply because of the May 13 Order.
3. Fourth Defense: Failure to State a Claim
SciMed's Fourth defense asserts that ACS's amended complaint fails to state a claim upon which relief can be granted. In order to state a claim of patent infringement, a plaintiff must allege that the defendant makes, uses, offers to sell, or sells the patented invention within the United States, during the term of the patent, and without authority of the patent holder. See 35 U.S.C. § 271(a). ACS has pled that it has the right to bring suit on the Yock patents at issue and that SciMed has manufactured, used, sold, or distributed catheters infringing one or more claims of the '548, '273, '395, and '233 patents. Second Amended Complaint ¶¶ 18, 23, 28, 33. For the purposes of evaluating the sufficiency of pleadings, all averments must be taken as true and construed in the light most favorable to the pleading party. Pillsbury, Madison & Sutro v. Lerner, 31 F.3d 924, 928 (9th Cir.1994). Given that ACS has alleged the essential elements of patent infringement, ACS's has stated a claim for patent infringement. Accordingly, the Court strikes SciMed's Fourth Defense of failure to state a claim.[9]
D. SciMed's Counter Motion for Stay Pending Arbitration
SciMed filed a Counter-Motion for a stay pending arbitration in the event that the Court relied on interpretation of the settlement agreements, which contain arbitration provisions, in ruling that the prior agreements have preclusive effect on the current litigation. Because the Court has concluded that the agreements do not have any preclusive effect, SciMed's counter-motion is moot.
*1250 III. CONCLUSION
For the foregoing reasons, the Court hereby orders as follows:
(1) SciMed's Motion for Leave to Amend its First Amended Answer is GRANTED. SciMed shall file its Second Amended Answer within ten (10) days of the date of this order.
(2) ACS's Motion for Judgment on the Pleadings against Defendant's First, Third, Fifth, Sixth and Seventh Defenses is DENIED.
(3) ACS's Motion for Judgment on the Pleadings against Defendant's Fourth Defense is interpreted as a Motion to Strike the Fourth Defense and is GRANTED. SciMed's Fourth Defense is hereby STRICKEN.
(4) ACS's Contingent Counter-Motion for a Stay is DENIED as moot.
IT IS SO ORDERED.
NOTES
[1] During a PTCA procedure, a balloon dilatation catheter is carried through the patient's vasculature over a guidewire to a point where deposits, or "lesions," in the coronary arteries have blocked or narrowed the arteries thereby restricting blood flow. Once the catheter is in place, the balloon is inflated to compress or break the material forming the lesion in order to open the restricted artery to improve blood flow.
[2] This action is related to another case between these parties currently before the Court. On March 12, 1996, ACS filed an action against SciMed, C-96-0950-DLJ, for infringement of U.S. Patent No. 5,496,346 ("the '346 patent"), claiming that SciMed's "Express Plus II" and "Leap Express Plus" catheters infringe one or more claims of the '346 patent. The '346 patent, entitled "Reinforced Balloon Dilatation Catheter With Slitted Exchange Sleeve and Method," was issued on March 5, 1996 in the names of the inventors, Michael J. Horzewski and Dr. Paul G. Yock. The '346 patent relates generally to rapid exchange balloon dilatation catheters which are used in PTCA for treating coronary artery disease.
[3] The parties dispute the nature of the relationship between SciMed and BSC. According to ACS, SciMed is a division of BSC, while SciMed maintains that it is a subsidiary of BSC.
[4] ACS argues that this aspect of the Foster case was merely dicta as the holding of the case was limited to the issue of whether principles of res judicata apply at all to a consent decree in a patent case. To support its position, ACS quotes part of the Foster decision in which the Court wrote that it was "unable to rule on any of these questions [beyond the Lear v. Adkins] question as a matter of law and, accordingly must vacate the district court's summary judgment ruling and remand for its full analysis of these issues in accordance with this opinion." Foster, 947 F.2d at 483. ACS's argument is unfounded. The court remanded the case for a determination of whether the devices at issue were essentially the same as those in the previous litigation. The court made it clear that if the lower court found the devices to be materially different, claim preclusion would not apply. Id. at 480. In so doing, the court's remand instructions were the guiding principles to be followed by the district court. This Court intends to follow those guiding principles.
[5] The same is true with regard to the ACS/BSC litigation. ACS has presented no evidence to show that the EXPRESS PLUS/II catheters at issue in the present case are "essentially the same" as the SYNERGY catheter that was the subject of the ACS/BSC settlement agreement.
[6] The "EXPRESS Royalty Term" provides as follows: "SciMed's obligation to pay royalties under Section 12 ... shall terminate with respect to any claim in the Yock Patents upon final judgment of any court of competent jurisdiction, in litigation between ACS and a third party which judgment has not or cannot be appealed, holding such claim invalid or unenforceable."
[7] SciMed also seeks to expand its defense of invalidity because of anticipation to cover claim 2 of the '233 patent.
[8] No trial date has been set in this matter; the Markman hearing is scheduled for June 1, 1998.
[9] The Court interprets ACS's counter-motion for judgment on the pleadings as to SciMed's Fourth Affirmative Defense as a motion to strike an insufficient defense. See Fed.R.Civ.P. 12(f).
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336 S.W.2d 921 (1960)
STEVENS BROTHERS et al., Appellants,
v.
J. W. MILLS et al., Appellees.
No. 6293.
Court of Civil Appeals of Texas, Beaumont.
February 11, 1960.
Rehearing Denied June 1, 1960.
*922 James E. Faulkner, Cold Springs, for appellants.
James M. Crane, Conroe, for appellees.
ANDERSON, Chief Justice.
Appellees, J. W. Mills and H. L. Mills, sued for the value of gravel alleged to have been removed by the defendants from ten acres of land in San Jacinto County, a part of the Sarah Goodnow Survey. Joe E. Stevens, Jr., and Elijah (Lige) Stevens, individually and as partners under the name of Stevens Brothers, and also Henry Alsobrooks and Sylvester Wilburn were named as defendants. Trial to the court, without a jury, resulted in a judgment that plaintiffs recover of Stevens Brothers and the partners individually the sum of $3,750 and that they take nothing against defendants Alsobrooks and Wilburn. Stevens Brothers and the two partners comprising it have appealed.
Although appellants have brought forward fifteen points of error, there actually is but one question of consequence to be resolved. It is that of whether an identifiable ten acres of land was described in appellees' petition and in the deed under which appellees claim title, or whether the descriptions are void for uncertainty. We hold the descriptions sufficient.
The question arises because the land was described in each instrument as being the southeast quarter of the southwest quarter of the northeast quarter of the Sarah Goodnow Survey, and appellants claim that because of the shape of the Goodnow Survey neither the quarter of the survey nor the subquarters to which reference was made can be identified. There might be merit to appellants' claim if the land were not otherwise described, because the lines of the Goodnow Survey run as follows: N. 45 E. 2033 varas from the beginning point; thence N. 45 W. 1775 varas; thence S. 45 W. 2033 varas; thence S. 45 E. 1775 varas to the beginning point. *923 But there is in the petition and in the deed additional descriptive matter which renders certain the ten acres described. The land is described in the petition as being "the same land described in a deed from J. J. Denny to J. W. Mills and H. L. Mills, dated March 30, 1932, and recorded in volume 25 page 515 San Jacinto County Deed Records." It is described in the Denny-Mills deed as being "the same property, among others, conveyed to me [J. J. Denny] by Homebuilders Investment Company, a corporation, on the 8th day of October, 1931, a copy of which is of record in volume 25 pages 255-56 deed records of San Jacinto County, Texas." In the deed to Denny, which was the first of the series of instruments in which the northeast quarter of the Goodnow Survey was referred to, the land thereby conveyed was described as being "the same property conveyed to Homebuilders Investment Company by E. W. Love by deed dated April 18, 1931, and recorded in vol. 24, page 538, Deed Records of San Jacinto County, Texas." The Love deed described a particular 160 acres of land, one quarter of the Goodnow Survey, by metes and bounds. Strictly speaking, the quarter described was perhaps a north rather than a northeast quarter, but when the instruments are construed together there can be no doubt about what the parties to the subsequent instruments were referring to as the northeast quarter nor about the fact that they were treating the northwest line of the Goodnow Survey as the survey's north line.
With the exception of the fifth, the first seven of appellants' points have to do, in one way or another, with the sufficiency of the description of the land. The fifth complains of the overruling of a plea in abatement in which appellants set up that appellees' cause of action, if any, was "barred by the 3, 5, 10, 25, and 2 and 4 year Statutes of Limitations respectively." All seven points are overruled. Limitation was not an issue in the case.
Purporting to act under Rules 791, 792, and 793, Texas Rules of Civil Procedure, appellants demanded before trial that appellees file an abstract of title in the case. Appellees did not comply with the request. By their eighth point, appellants claim that it was therefore error for the trial court to permit appellees to make any showing of title to the land. The point is overruled. The mentioned rules apply to actions of trespass to try title, and the case at bar is not of that nature. See Snow v. Harding, Tex.Civ.App., 180 S.W.2d 965.
By their points nine through fifteen, appellants complain of evidence which was admitted over objections. The points are overruled. If there was any of the evidence which should not have been admitteda matter on which we express no opinionit will be presumed that the trial judge disregarded it, there having been other evidence which was amply sufficient to support the judgment. See 3B Tex.Jur., Appeal and Error, Sec. 1043. p. 671. Moreover, the evidence, in the respects complained of, was not of a nature calculated to influence the judgment.
No reversible error having been presented, the judgment of the trial court is affirmed.
On Motion for Rehearing
In their motion for rehearing, appellants argue that, assuming the legal sufficiency of the land description in the deed under which appellees claim and in appellees' petition, there still is no evidence to show that they removed gravel from the described land. In other words, they argue that the described land was not identified on the ground as the land from which they removed gravel. This, however, is not a matter that has been properly presented for review. No point in appellants' brief raises it specifically, nor does any point assert generally that the judgment is without support in the evidence. We feel constrained to hold, therefore, that appellants *924 have waived their right to complain of the particular deficiency in the evidence if such there is.
Appellants take the position that the matter is raised by their third and sixth points, but with this we cannot agree. To demonstrate that the points were directed to an entirely different matter, it is only necessary to quote from appellants' brief the explanation that was given as to why points 1, 2, 3 and 6 were briefed together:
"These 4 points are germane one to the other since they all pertain to the patent fact that the purported description of the land made the basis of appellee's (Plaintiffs below) suit is utterly void and describes nothing that can be located on the ground and is patently void on the face of it and cannot be aided by extrinsic evidence even if admissible for that purpose and thus cannot be cured by the evidence. Point 1 in this group is based upon the Plea in Abatement as to the utter lack of description and void description relied upon by appellees; Point 2 is based upon the Special Exception which was entered subject to and without waiving the Plea in Abatement and went to the same patent defect in the description. Point 3 is predicated upon appellants' timely Motion for Judgment on the same ground, the complete lack of description, there being no description either in the pleadins or in the evidence upon which a judgment could be based. Point 6 summarizes the foregoing points; it simply reasserts the above errors of the Court and urges that neither the pleadings nor the evidence are sufficient to support a judgment because of the insufficiency and utter voidness of the purported description of the land and gravel in question. These 4 points, all going to the utter and complete lack of description, are grouped for discussion for the sake of brevity and clarity."
A rereading of appellants' brief, in the light of their motion for rehearing, has disclosed that originally we misapprehended the true import of their seventh point. By and under it appellants urge that, aside from the claimed insufficiency of the land description in appellees' pleadings and deed, and aside from the question as to whether the described land was sufficiently located on the ground, appellees failed to prove title to the land or gravel. In this connection they argue that they themselves were shown to be in possession of the land, claiming under a deed; that appellees were therefore under the burden of showing superior title or right to the land and gravel; and that appellees failed to do this, having introduced in evidence only a deed to themselves from J. J. Denny. There might be merit in appellants' contention if they themselves had not introduced in evidence the deed from E. W. Love to Homebuilders Investment Company and the deed from the latter company to J. J. Denny, who granted to appellees. Appellants introduced the deeds unqualifiedly and are therefore bound by them. Vincent v. Vincent, Tex.Civ.App., 320 S.W.2d 217; Freed v. Bozman, Tex.Civ. App., 304 S.W.2d 235; Lock v. Morris, Tex.Civ.App., 287 S.W.2d 500; 17 Tex. Jur., EvidenceCivil Cases, Sec. 419, pp. 928-30, and cases there collated. They did not subsequently acquire appellees' title, nor did they prove that they had acquired a title superior to the one they assisted in showing to be in appellee. Upon the record as made, therefore, appellants' seventh point is without merit, and our original action in overruling it is here reaffirmed.
The other matters dealt with in appellants' motion for rehearing are thought to be sufficiently dealt with in the original opinion. The motion is overruled.
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306 S.W.2d 739 (1957)
Paul Gerald CRAFT, Appellant,
v.
TEXAS DEPARTMENT OF PUBLIC SAFETY et al., Appellees.
No. 6704.
Court of Civil Appeals of Texas, Amarillo.
October 21, 1957.
Rehearing Denied November 18, 1957.
*740 W. Hugh Harrell, Lubbock, for appellant.
Geo. E. Gilkerson and J. Collier Adams, Lubbock, for appellees.
CHAPMAN, Justice.
Appellant, upon receipt of an Order of Automatic Suspension of his Commercial Operator's License from the Texas Department of Public Safety filed his petition in the 72nd Judicial District Court of Lubbock County seeking a temporary and permanent injunction against the Texas Department of Public Safety, its servants, officers, employees, agents and/or representatives, namely, Homer Garrison Jr., Director; A. F. Temple, Chief, Driver's License Division; F. G. Ferguson, Supervisor, Driver Improvement Section and Captain Sanford B. Lee, Driver's License Division of Lubbock, Texas, restraining and enjoining them from further proceeding under Vernon's Ann.Civ.St. Article 6687b to suspend the plaintiff's Commercial Operator's License.
The notice of suspension recited in part as follows:
"Confirming The Automatic Suspension Of License Or Non-Resident Driving Privilege Of
Paul Gerald Craft
Box 1491 Opr's. Lic. 787032-nsi
Lubbock, Texas
"Abstract Of Court Records show that you were convicted on September 28, 1956 in the State of New Mexico of the second offense of operating a motor vehicle upon a public highway while you were under the influence of intoxicating liquor.
"Therefore, under the provisions of Article 6687b, R.C.S., Acts of the 47th Legislature, Regular Session, your license and/or privilege to oerate a motor vehicle upon any public road or highway and any and all Operator's Commercial Operator's and Chauffeur's License issued to you by this State, or any other State or Commonwealth, were automatically suspended for a period of twelve months from the above mentioned date of conviction."
In his petition to the court below appellant made application for temporary and permanent injunction and appellees answered by a plea to the jurisdiction. Appellant also prayed in the alternative that if this court should affirm the trial court's order sustaining the plea to the jurisdiction that we permit him to remove the cause to the County Court at Law, Lubbock County, Texas. The court below set the case down for a hearing and in due time, by agreement of the parties, it was tried on the pleadings for temporary injunction and the plea to the jurisdiction.
With the record as stated before it the court below held that the District Court did not have jurisdiction of the facts alleged in appellant's petition and dismissed the case. From this order of dismissal appellant perfected his appeal to this court.
Findings of Fact and Conclusions of Law were requested by appellant. In such findings and conclusions the court below held that by virtue of Article 6687b the District Court did not have jurisdiction of the cause of action alleged by appellant. Said article is titled, "Drivers', chauffeurs', and commercial operators' licenses; accident reports." Section 31 thereof is titled, "Right of appeal to courts," and provides as follows:
"Any person denied a license or whose license has been cancelled or revoked by the Department except where such cancellation or revocation is automatic under the provisions of this Act shall have the right to file a petition *741 within thirty (30) days thereafter for a hearing in the matter in the County Court at Law in the county wherein such person shall reside, or if there be no County Court at Law therein, then in the county court of said county, and such court is hereby vested with jurisdiction, and it shall be its duty to set the matter for hearing upon ten (10) days written notice to the Department, and thereupon to take testimony and examine into the facts of the case, and to determine whether the petitioner is entitled to a license or is subject to suspension, cancellation or revocation of license under the provisions of this Act."
As we understand appellant's contention it is to the effect that Article 6687b relative to automatic suspension provided no appeal and therefore he is entitled to injunctive relief in the District Court.
We agree with appellant that one cannot be deprived of a license or permit, such as the one under consideration, without due process, and that notice without a hearing, as was done in this case did not constitute due process. Texas Department of Public Safety v. Hamilton, 304 S.W.2d 719.
In the case just cited and also in a case from our own court decided November 19, 1956, Department of Public Safety v. Smith, Tex.Civ.App., 296 S.W.2d 557, where the same administrative body notified drivers that their licenses to drive because of convictions in other states had been cancelled the aggrieved parties appealed to the County Court at Law of their respective counties from such acts on the part of the Department of Public Safety. We believe these cases furnish authority for appellant to have appealed the attempted suspension of his license by the Department of Public Safety to the County Court at Law of Lubbock County.
Article 5, Section 8 of the Vernon's Ann.St. Constitution of Texas provides what shall constitute original jurisdiction for our District Courts. As applicable to this case, under the state of the record before us, the only possibility for jurisdiction would have been under an application for injunction, an equitable proceeding. Such action would not lie when appellant had an adequate remedy at law. It is said in 30 C.J.S. Equity § 20, page 338, that * * * "equity will not take jurisdiction where there is an adequate remedy at law, unless special jurisdiction has been conferred by statute." See also Burford v. Sun Oil Co., Tex.Civ.App., 186 S.W.2d 306, syl. 10. Special jurisdiction has been conferred by statute for appeals from acts of the Department of Public Safety of the State of Texas in cancelling, suspending or revoking drivers' licenses by Section 31, Article 6687b supra, but such jurisdiction was specifically conferred on the County Courts at Law, if such there are in the county of the person proceeded against, and if not then in the County Courts.
Accordingly, it is our view of the case that the District Court below was correct in holding it did not have jurisdiction and in dismissing the case. It requires no citation of authority for us to say that as a general rule the jurisdiction of the trial court over the subject matter must affirmatively appear from the record before us before we have jurisdiction in the Court of Civil Appeals. This case is no exception to that general rule.
We know of no authority by which we could grant appellant's request to transfer the case to the County Court at Law of Lubbock County. Accordingly, the judgment of the court below in holding it did not have jurisdiction is affirmed and the appeal is dismissed.
On Motion for Rehearing
PER CURIAM.
Appellant, in his motion for rehearing urgently requests that this court grant him the right to refile in the County Court at *742 Law of Lubbock County his appeal from the action of the Department of Public Safety in attempting to declare an automatic suspension of his Commercial Operator's License. He cites as authority for his contention Article 5539a, V.T.C.S. and Buford v. Sun Oil Company, Tex.Civ.App., 186 S.W.2d 306.
We are in complete sympathy with appellant's right to "have his day in court" and we regret that he did not originally file his appeal in the County Court at Law of Lubbock County from the action of the Department of Public Safety. Under the authority of the two Department of Public Safety cases cited in our original opinion, he could have done so. Additionally, we are certain that his failure to do so was not in intentional disregard of jurisdiction but because of an honest mistake of his counsel made before the announcement of the case of Department of Public Safety v. Hamilton, supra, interpreting Sec. 31 Art. 6687b.
If this court had authority to transfer this case to the County Court at Law of Lubbock County we would not hesitate to do so, but when we do not have jurisdiction, as in this case, the only authority we have is to dismiss.
If appellant files his appeal in the County Court at Law of Lubbock County within sixty days from the time our judgment of dismissal for want of jurisdiction becomes final, it will be the prerogative of the County Court at Law to pass on the question as to whether, under the authority of Article 5539a and Buford v. Sun Oil Company, supra, he is entitled to file appeal at that time from the action of the Department of Public Safety for the reason that his failure to file in that court originally was not in intentional disregard of jurisdiction. We are not passing on that question here.
Appellant's motion for rehearing is overruled and as stated in our original opinion, the judgment of the court below in holding it did not have jurisdiction is affirmed and the appeal is dismissed.
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324 Md. 481 (1991)
597 A.2d 952
DAVID TOWNES DAWSON, PERSONAL REPRESENTATIVE OF THE ESTATE OF DR. TOWNES L. DAWSON, ET AL.
v.
PRINCE GEORGE'S COUNTY, MARYLAND.
No. 12, September Term, 1991.
Court of Appeals of Maryland.
October 31, 1991.
David Townes Dawson, Temple Hills, for petitioners.
J. Michael Dougherty, Jr., Associate County Atty. and Albert J. Lochte, Deputy County Atty. (Michael P. Whalen, County Atty., on brief), Upper Marlboro, for respondent.
Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI and ROBERT M. BELL, JJ.
RODOWSKY, Judge.
This case involves tax sale procedure. Specifically, we shall hold that the circuit court erred in entering an order foreclosing the right of redemption without having ruled on the property owner's pending application for the court to resolve a dispute over part of the amount to be paid to redeem.
The petitioner in this Court is David Townes Dawson (Dawson), the owner, individually or as personal representative of his father's estate, of seven parcels of land (the Property) in Prince George's County that were sold at tax sale on May 8, 1989. The respondent is Prince George's County (the County), the tax sale purchaser. On December 1, 1989, the County filed its "Complaint to Foreclose Rights of Redemption" in the Property. Both an order of publication and writs of summons were issued fixing January 29, 1990, as the date after which a final decree of foreclosure would be entered. The order of publication, prepared by counsel for the County, warned all interested persons "to be and appear" in the Circuit Court for Prince George's County by that date "and redeem the aforesaid property and answer the Complaint...." The writ of summons, generated by the court's computer, warned that "[f]ailure to file either a written answer or petition to redeem" on or before the specified date would result in a final order of foreclosure.
On the morning of January 29, 1990, Dawson filed, and the clerk date and time stamped, a paper headed, "Answer and Petition to Redeem." By this filing Dawson sought to have the court determine the amount of fee for counsel for the County that Dawson was required to pay in order to effect redemption of the Property. By order signed January 31, 1990, and filed and docketed February 2, 1990, the court foreclosed the right of redemption in the Property. The final order makes no reference to the paper filed by Dawson.[1]
Dawson appealed to the Court of Special Appeals which affirmed in an unreported opinion. That court reasoned that the circuit court need not have decided the amount of fee payable by Dawson because Dawson failed to request a hearing in a manner complying with Maryland Rule 2-311.[2] We granted Dawson's petition for certiorari.
Tax sale proceedings are, under the Maryland Rules, one of the Chapter 1100 special proceedings. Subtitle BS, dealing with tax sales, contains only one rule, Rule BS40. It simply incorporates the procedural provisions of the Maryland Code dealing with tax sales. Title 2 of the Maryland Rules "applies to civil matters in the circuit courts ... except as otherwise specifically provided or necessarily implied." Rule 1-101. The result is that the procedure in tax sale cases is primarily governed by statutes which are supplemented by the rules only to the extent that those rules are consistent with the statutory provisions. For example, we held that former Rule 530, providing for dismissal of actions in a circuit court for want of prosecution, applied to proceedings to foreclose the equity of redemption following a tax sale, Prince George's Homes, Inc. v. Cahn, 283 Md. 76, 389 A.2d 853 (1978), but we also held that the decree pro confesso, of former equity practice, did not apply to tax sale foreclosures, Simms v. Scheve, 298 Md. 1, 467 A.2d 499 (1983).
The principal statutes governing tax sales are Maryland Code (1986, 1991 Cum.Supp.), §§ 14-808 through 14-854 of the Tax-Property Article.[3] In general outline, the tax collector for a county sells property on which real estate taxes are in arrears. § 14-808. The purchaser receives a certificate of sale. § 14-820. The purchaser must file a complaint to foreclose the owner's right of redemption during a period beginning six months after the sale and ending two years after the sale. § 14-833. Until a final order of foreclosure, the owner retains the right to redeem. § 14-827.
The amount to be paid to the collector on redemption is provided by § 14-828, while the amount to be reimbursed to the purchaser is governed by § 14-843. Here, the County is both collector and purchaser. Section 14-828(a) provides:
"(a) Payments to collector. If the property is redeemed, the person redeeming shall pay the collector:
(1) the total price at the tax sale for the property together with interest;
(2) any taxes, interest, and penalties paid by any holder of the certificate of sale;
(3) any taxes, interest, and penalties accruing after the date of the tax sale; and
(4) unless the party redeeming furnishes the collector a release or acknowledgement executed by the plaintiff or holder of the certificate of sale that all actual expenses or fees under § 14-843 of this subtitle have been paid to the plaintiff or holder of the certificate of sale, any expenses or fees for which the plaintiff or the holder of a certificate of sale is entitled to reimbursement under § 14-843 of this subtitle."
Section 14-843 provides:
"On redemption, the plaintiff or the holder of a certificate of sale is entitled to be reimbursed for expenses incurred in any action ... to foreclose the right of redemption. In addition, the plaintiff or holder of a certificate of sale, on redemption, is entitled to be reimbursed for fees paid for recording the certificate of sale, for attorney's fees that do not exceed the sum of $250 for each certificate of sale, for expenses incurred in the publication and service of process by publication, for reasonable fees for a necessary title search, and for taxes, together with interest and penalties on the taxes, arising after the date of sale that have been paid by the plaintiff. The plaintiff or holder of a certificate of sale is not entitled to be reimbursed for any other expenses."
Section 14-835 requires that the complaint in an action to foreclose include "a description of the amount necessary for redemption." § 14-835(g). In this action the County filed a single complaint to foreclose, on a consolidated basis, the right of redemption in all seven properties described in the complaint. The complaint avers, however, only that the amount necessary for redemption includes attorney's fees, without specifying the amount. Dawson contends, and the County does not dispute, that the amount which Dawson would have been required to pay was $250 per tax account parcel, the maximum allowable under § 14-843.[4] The $250 maximum "for each certificate of sale" under § 14-843 is in addition to the cost of "a necessary title search." Dawson sought to have the circuit court determine the amount of counsel fee to be included in the total amount to be paid to redeem the Property.
Section 14-829 addresses disputes over the amount to be paid to redeem. It reads:
"(a) Application to court to fix amount due. If the property is redeemed after an action to foreclose the right of redemption is instituted and there is any dispute regarding redemption, the person redeeming may apply to the court before which the action is pending to fix the amount necessary for redemption in accordance with the provisions of this subtitle.
(b) Accepting money without court order. Except as provided in subsection (c) of this section, the collector may accept money for redemption without an order of court.
(c) Court order required where amount disputed. If there is any dispute regarding redemption, the collector shall accept no money for redemption unless and until a certified copy of the order of court fixing the amount necessary for redemption is filed with the collector."
Dawson's "Answer and Petition to Redeem" admits ownership of the Property and asks the court to fix costs of redemption in specified amounts for various items, other than counsel fee. These other amounts are those which the County requested, so that the only dispute relates to the amount of counsel fee. Dawson's filing then reads in relevant part:
"WHEREFORE, Defendant prays:
"1. That the Court fix the Costs of the said property for redemption of same by the said Defendants.
"2. That the Court allow a hearing to determine the appropriate Legal fees due to the County."
Beneath Dawson's signature to the body of the pleading there appear, centered, underlined, and in uppercase letters, the words, "REQUEST FOR HEARING." Immediately below those words are approximately three blank lines followed by the centered words, "CERTIFICATE OF SERVICE." Below that heading are a certificate of service and a second signature by Dawson.
The tax sale statutes address two types of responses by an owner to a petition to foreclose the right of redemption. These are a challenge to the tax sale itself and a challenge to the amount required to redeem. The "validity of the procedure [by which the Property was sold] is conclusively presumed unless a defendant [in the foreclosure] proceeding shall, by answer, set up as a defense the invalidity of the taxes or the invalidity of the proceedings to sell or the invalidity of the sale." § 14-842. Here, the "answer" aspect of Dawson's pleading did not attack the sale. The "petition to redeem" portion of Dawson's filing, articulated in the above-quoted prayers for relief, challenged the redemption price. It effectively invoked the right conferred on an owner under § 14-829 to have the court "fix the amount necessary for redemption...."
The County contended, and the Court of Special Appeals held, that Dawson's bare heading, "REQUEST FOR HEARING," must comply with Rule 2-311(f). Compliance with that rule is immaterial. Rule 2-311 deals with motions practice in the circuit courts and is inapplicable to the issue before us. Under the tax sale statutes, Dawson's options were severely limited. He opted to redeem, but he also affirmatively asked the circuit court to fix the "appropriate [l]egal fees due to the County." In view of the dispute between the County and Dawson, the request was for relief under § 14-829. By analogy to Title 2 of the Maryland Rules, Dawson had filed in tax foreclosure practice a pleading in the nature of a counterclaim. We need not in the matter before us decide what summary procedures might be available for disposition of that request for relief, because neither party sought summary disposition. Thus, Dawson's pleading required a determination on the merits which could not be made without notice and an opportunity to be heard.
The County also submits that Dawson's "answer" is not in good form if tested against Rule 2-323. The alleged deficiency is not prejudicial to the County, even if we assume, arguendo, that Rule 2-323 applies generally to responses to petitions to foreclose when the tax sale is not challenged.
The County argues that Dawson neither redeemed nor tendered the redemption price. The argument seemingly is based on the introductory clause of § 14-829(a), "[i]f the property is redeemed after an action to foreclose the right of redemption is instituted...." This language does not confine an owner's invocation of the right conferred by § 14-829 to instances in which there is a consummated redemption. The introductory language simply alerts the reader to the fact that § 14-829 will deal with situations in which the response of the owner to a petition to foreclose is to redeem the property, as opposed to challenging the tax sale. The same introductory language is used in § 14-828(a) which provides the amounts to be paid to redeem. Obviously one cannot have consummated a redemption of the property at the stage when the redemption price is being computed.
Further, the collector is prohibited by § 14-829(c) from accepting any money for redemption, absent a copy of a court order fixing the amount, in cases where the redemption amount is disputed. For example, in disputed cases, an owner could not consummate a redemption, by way of payment under protest of the full amount claimed, prior to the court's determination of the amount to be paid, because the collector may not then take the money.
JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED. CASE REMANDED TO THAT COURT FOR THE ENTRY OF A JUDGMENT REVERSING THE JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE'S COUNTY AND REMANDING THIS CASE TO THE CIRCUIT COURT FOR PRINCE GEORGE'S COUNTY FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY PRINCE GEORGE'S COUNTY, MARYLAND.
NOTES
[1] The briefs and representations at oral argument reveal that the parties are in substantial agreement on the following facts. Several days prior to January 31, 1990, the circuit court clerk's office transmitted the file to the judge assigned to chambers duties. The judge telephoned Dawson to inquire whether he intended to redeem. Dawson replied that he did so intend, pointing out that his deadline was January 29.
From these agreed facts one might infer that, prior to January 31, Dawson's filing of January 29 did not get into the file folder for the action in chambers, that the file contained the form of order of foreclosure presented by counsel for the County in anticipation that there would be no redemption, and that the judge did not have in mind, while signing the order, the earlier conversation with Dawson.
[2] Maryland Rule 2-311, entitled "MOTIONS," provides in relevant part:
"(a) Generally. An application to the court for an order shall be by motion which, unless made during a hearing or trial, shall be made in writing, and shall set forth the relief or order sought.
....
(c) Statement of Grounds and Authorities. A written motion and a response to a motion shall state with particularity the grounds and the authorities in support of each ground.
....
(f) Hearing Other Motions. A party desiring a hearing on a motion, other than [certain post trial motions], shall so request in the motion or response under the heading "Request for Hearing." Except when a rule expressly provides for a hearing, the court shall determine in each case whether a hearing will be held, but it may not render a decision that is dispositive of a claim or defense without a hearing if one was requested as provided in this section."
[3] Unless otherwise indicated, all statutory references are to the Tax-Property Article.
[4] The parties have argued this case in terms of a fee of $1,500, or $250 for each of six tax account parcels. After the order for appeal was noted in this case, the circuit court entered an order dismissing one of the properties from the action "for the reason that this property has been removed from the tax rolls by the State Department of Assessments and Taxation." Assuming that the appeal as to that parcel is nevertheless before us, that aspect of the appeal is moot, leaving six parcels in dispute. Thus, when the parties in argument refer to $1,500 as the disputed fee, they apparently refer to the maximum fee allowable for each of the six remaining parcels.
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306 S.W.2d 935 (1957)
Victoria CHEKANSKI, Appellant,
v.
TEXAS & NEW ORLEANS RAILROAD COMPANY, Appellee.
No. 13143.
Court of Civil Appeals of Texas, Houston.
November 7, 1957.
Rehearing Denied November 21, 1957.
*936 Peter P. Cheswick, Houston, for appellant.
Baker, Botts, Andrews & Shepherd, George Jewell, Jr., and Finis E. Cowan, Jr., Houston, for appellee.
BELL, Chief Justice.
Appellant filed suit against appellee to recover damages for injuries sustained by her when she slipped and fell as she crossed the right of way of appellee on April 16, 1953. In her petition appellant alleged that for many years members of the public had used a pathway across the tracks of appellee where Hickory Street in the City of Houston dead-ends at the south line of appellee's right of way; that several days before April 16 servants and employees of appellee placed large clods of gravel, dirt and asphalt mixed together on and along the pathway; that the act of so depositing this material was negligence; that appellant slipped on a large asphalt clod lying on the pathway and sustained injury to her left foot, ankle, nerves, tendons, tissues and circulatory parts of her left foot and ankle.
The appellee, in addition to a general denial, pled appellant was guilty of negligence solely causing the injury in that she failed to keep a proper lookout for obstructions and debris; that she stepped into the pile of debris and rocks which were open, obvious and clearly visible without knowing its content; and she failed to take another pathway on seeing the rocks and debris in her path. Further, appellee answered that the rocks and debris were open and obvious to appellant and she assumed the risks incident to crossing appellee's right of way. Assumption of risk was further pleaded by the assertion that appellant had full notice of rocks and material being necessarily placed on the right of way from time to time and that with such notice appellant voluntarily assumed the risks incident to using the right of way as a crossing.
Trial of the case was commenced on November 13, 1956, and on November 15 *937 the trial court, at the conclusion of all testimony, instructed the jury to return a verdict for appellee. Such a verdict was returned by the jury.
On November 19, 1956, before entry of judgment, appellant filed what she denominated a "Motion to Set Aside Verdict of Jury." The motion asked that the verdict be set aside and "no judgment be entered on such verdict." Then followed the reasons which in substance asserted that fact issues had been raised and the court should have allowed the jury to pass on the issues. In the prayer appellant asked that the verdict be set aside; that no judgment be entered; that the cause be restored to the trial docket and for such further relief as she might be entitled to in law.
Thereafter, on January 25, 1957, the court entered a judgment on the verdict in favor of appellee. No notice of appeal was contained in such judgment. The judgment makes no reference to appellant's "Motion to Set Aside Verdict of Jury" or any motion for new trial.
On January 29, 1957, appellant filed an appeal bond, reciting that notice of appeal had been given. It, in fact, had not been given.
Thereafter, on March 8, 1957, appellant filed a motion asking the court to rule on her motion for new trial filed November 19, 1956. On the same day the court entered its order reciting no formal order overruling such motion had been entered as he had treated such motion as having been overruled by implication by the entry of the judgment of January 25. The order of March 8 contained a notice of appeal.
Appellee has moved to dismiss the appeal because of the want of a timely notice of appeal. We conclude that no timely notice was given, but that under the facts above stated none was necessary. Appellee concedes, and we concur in such concession, that in one well defined instance only will jurisdiction be conferred on this Court by filing of a bond without notice of appeal. This instance is where a motion for new trial is overruled, not by specific ruling of the court, but by operation of law. Houston Life Ins. Co. v. Dabbs, Tex.Com. App., 125 Tex. 100, 81 S.W.2d 42; Combined American Ins. Co. v. Morgan, Tex.Civ. App., 207 S.W.2d 701; McDonald "Texas Civil Practice", § 18.31, Vol. 4.
The motion filed by appellant was not called a motion for new trial, but its substantive allegations are essentially complaining of the action of the trial court in the trial of the cause. It also calls upon the court to review his action and to restore the cause to the trial docket. We hold, therefore, that the motion was a motion for new trial.
The motion was prematurely filed. However, such is not fatal to its effectiveness. Rule 306c, Texas Rules of Civil Procedure, provides that no motion for new trial shall be ineffective because prematurely filed. To the contrary, it will be deemed to have been filed on the day of, but subsequent to, the judgment assailed. Valley Transit Co. v. Lopez, Tex.Civ.App., 263 S.W.2d 830. Therefore, the motion was filed January 25, 1957. It should have been presented within 30 days thereafter, or, on or before February 24. It not having been presented, it was overruled by operation of law, on February 24.
The bond was already on file. It had been prematurely filed, but under Rule 306c, T.R.C.P., it is nevertheless effective and will be deemed to have been filed on the day of but subsequent to the overruling of the motion for new trial by operation of law.
The order signed by the court March 8, 1957, was without validity and has no bearing on this decision.
We overrule appellee's motion to dismiss the appeal.
*938 We now turn to a consideration of the appeal on its merits.
The evidence established that for many years there had been no public crossing over the right of way of appellee, but that Hickory Street came to an end at the south line of the right of way and then started again at the north right of way line. Shortly to the east of what would be the east line of the street, if the street crossed appellee's right of way, where appellant received her injury, there was a pathway across appellee's right of way which had for many years been used by pedestrians. This use was known, or should have been known, to appellee. However, no evidence establishes any invitation or express consent to such use. The appellant had herself made use of this pathway for some time prior to April 16, 1953, the date of her injury. She used this way in going to and from her work. She was a seamstress at a garment manufacturing concern. On the day of her injury, she was on her way to her work. At the time of her injury she was on the right of way belonging to appellee. Appellee had no interest in the business of appellant and she had no interest in appellee's business. There was absolutely no business relationship between them. The presence of appellant on appellee's right of way was solely for her own convenience and such presence was not of mutual aid to herself and appellee. She was, therefore, a mere licensee and not an invitee, Cowart v. Meeks, 131 Tex. 36, 111 S.W.2d 1105; Mendoza v. Texas & P. Ry. Co., Tex.Civ.App., 70 S.W.2d 261; Kruse v. Houston & T. C. R. Co., Tex.Civ.App., 253 S.W. 623.
The evidence as to appellee's conduct, on which liability is predicated, showed that on April 15, the day before appellant's injury, between 3:00 and 3:30 o'clock in the afternoon, a Negro man in a red dump truck brought two loads of material and dumped it on the right of way near, and partially on, the pathway used by pedestrians. The witness who testified to this did not know who the man was or for whom he worked. There was no sign of any kind on the truck identifying to whom it belonged. When the first load was dumped, no one was present but the Negro driver and the witness who lived adjacent to the right of way. When the second load was dumped, some men, who the witness stated were members of appellee's section gang, were standing on the right of way watching the material being unloaded. The witness could not identify any of them but said she recognized the foreman whom she had seen working for the railroad for some time. He was a Spanish man. However, none of the members of the party made any effort to spread the material. In fact, they did nothing with respect to it. The material consisted of loose dirt and rocks of varying size. Some of the large clods looked like asphalt that had come off of a street. These rocks and clods were intermingled with some of the dirt. The material was placed on the side of the roadbed which is built up some six or seven feet. The slope down from the tracks was at an angle of from 30 to 35 degrees.
All of the above testimony was given by a Mrs. Braswell.
Appellant testified that on the afternoon of April 15 she went home early and the material was not there when she crossed the right of way. She stated there was just hard packed gravel on the pathway. She had used the pathway many times. She knew that in the past from time to time appellee had material placed on the right of way at the place where the pathway crossed. On the morning of April 16 she was crossing the right of way between 6:30 and 7:00 o'clock. She came from the north and when she got to the tracks she noticed the material that had been dumped there the afternoon before. She saw that there were two piles consisting of dirt intermingled with rocks. She looked over the *939 situation and saw there was a path between the two piles about two feet wide that had only loose dirt. She started down the inclined roadbed and her feet slipped. She was indecisive concerning what she slipped on. She did not, however, step on one of the large rocks and fall. There was no testimony of any hole into which she stepped. She merely stepped into the loose dirt and fell. She did not know how thick the dirt was. No one, so far as the evidence discloses, witnessed the fall. After the fall, other persons, who were unidentified except for Mrs. Braswell, came up to her, but remained only momentarily. In the fall she fractured her right ankle. There was nothing concealed under the loose dirt where she slipped.
This, apart from the testimony of two witnesses concerning use by pedestrians of the pathway, constituted all of appellant's evidence which bears on the question of liability.
Appellee established by Mr. Porch, its assistant roadmaster, that it had no red colored trucks but that its trucks were green. He also described the way the roadbed at the point of the accident was built. Further, the witness testified he knew of no dumping of material that was done by appellee at the relevant point in 1953 and he would, because of his duties, have known of it if any had been done. No one asked his permission. He testified no Spanish fellow was foreman of the section gang, but at that time Mr. O. C. Meyers was foreman.
Mr. Nealy, appellee's roadmaster, testified that on April 15 Section 56-A was the section on the railroad covering the relevant point. The record for the day showed that the gang charged with the responsibility of maintaining Section 56-A spent 16 hours patrolling the track, 28 hours servicing and unloading track materials, and 8 hours for switch oiling.
The above fairly well summarizes the testimony in the case.
Appellant, being a mere licensee, must accept the premises as she finds them. Appellee only owed her the duty not to wilfully, wantonly, with gross negligence, or by active negligence, injure her. Carlisle v. J. Weingarten, Inc., 137 Tex. 220, 152 S.W.2d 1073; Galveston Oil Co. v. Morton, 70 Tex. 400, 7 S.W. 756; Dobbins v. Missouri, K. & T. Ry. Co., 91 Tex. 60, 41 S.W. 62.
Under the facts of this case, as stated above, there was no wanton or wilful act by appellee or its employees. Neither was there any gross negligence. The evidence wholly fails to establish any active or affirmative act of negligence on the part of any employee of appellee. No evidence identifies the Negro who dumped the materials as an employee of appellee. No evidence establishes the truck belonged to or was used by appellee. The very most it shows, if that much, is that the members of appellee's section gang saw the material dumped and were merely passive in their attitude toward the act.
We are further of the view that appellant failed to show any breach of duty by appellee which it owed her. The condition was open and obvious. At the very most, appellee would have been obligated to warn her that the dirt had been placed on the right of way the evening before. The evidence shows, however, that she saw the material, saw the two foot path between the two piles, saw the loose dirt on the pathway, and, nevertheless, attempted to use the pathway. When she used it, her feet slipped on the loose dirt. There was no evidence of anything concealed under the dirt. The clods were in part concealed under the dirt which was in piles. The clods had nothing to do with her falling. She saw no hole where she fell. She just stepped on the loose dirt and fell. The presence of loose dirt was open and obvious to her. Where there is an open and obvious condition which brings about the injury, there is no breach of duty. We do not *940 mean to say appellee here owed appellant, a mere licensee, any duty to warn, but even had she been an invitee, where there would be a duty by the property owner to warn of a condition, there is no breach of duty where the condition is open and obvious. McElhenny v. Thielepape, Tex., 285 S.W.2d 940; McKee v. Patterson, 153 Tex. 517, 271 S.W.2d 391; A. C. Burton, Inc., v. Stasny, Tex.Civ.App., 223 S.W.2d 310, error refused.
This case is distinguishable from that of Gulf Refining Company v. Beane, 133 Tex. 157, 127 S.W.2d 169. In that case the property owner changed the condition of the premises, gave no notice of such change and the injured party had no actual notice. Too, the condition causing the injury was a hole dug by the defendant which could not be seen at night, and the accident occurred at night. The condition there was in the nature of a concealed defect.
The judgment of the trial court is affirmed, WOODRUFF, J., not sitting.
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306 S.W.2d 829 (1957)
Mrs. Betty WHITE, Appellant,
v.
LEVY BROTHERS, Inc., Appellee.
Court of Appeals of Kentucky.
November 1, 1957.
Harry S. McAlpin, Louisville, for appellant.
S. L. Greenebaum, Louisville, for appellee.
WADDILL, Commissioner.
Mrs. Betty White brought this action against Levy Brothers, a Corporation, to *830 recover damages for slander and for false imprisonment. She has appealed from a judgment based on a directed verdict for the defendant.
Mrs. White was employed as a clerk in the appellee's department store. On May 9, 1955, she purchased a Davy Crockett outfit for her son from appellee's store. The belt of the suit was too small, and on May 11, 1955, after she had reported for work, she went to the boys clothing department and exchanged the belt for a larger one. She placed the belt in her pocketbook and went to another department to commence her day's work. Later that day she was questioned about the incident by an official of the appellee company. When it was determined that Mrs. White had merely exchanged one belt for another, she was asked to forget the matter and to return to her duties. However, she quit her job and filed this action.
The complaint charged that Mrs. White was falsely accused by an official of the appellee company of having stolen the belt in question. To sustain this allegation of slander, appellant relies upon: (1) A remark made by an official of the company to the manager of the store that Mrs. White should not be given a receipt for the belt; and, (2) the fact that an official of the company had asked Margie Irvin, another employee of the store, if she would sign a statement that Mrs. White had stolen the belt from the store. Neither the remark of the official of the company nor the questioning of Margie Irvin supports the charge of slander alleged by the complaint. Since the evidence fails to show that any words were spoken by an official of the company which imported a criminal act on the part of Mrs. White, the court correctly directed a verdict for appellee on this phase of the case. Bishop v. Smith, 198 Ky. 230, 248 S.W.538; Wooten v. Martin, 140 Ky. 781, 131 S.W. 783.
The complaint also seeks damages on grounds that Mrs. White was falsely imprisoned by the officials of the appellee company. However, the proof does not substantiate this accusation. The evidence does show that an official of the company interrogated Mrs. White about the belt and asked her to exhibit the contents of her purse. Apparently, Mrs. White voluntarily complied with this request, because her testimony does not show that she was forced or required to open her purse. Nor is there any evidence that Mrs. White was coerced in any manner during the time she was questioned by the officials of the company. Her statement that she was "afraid she was going to be arrested" and that she had been "ordered" into the office of her superior is of no particular significance because she also testified she told the officials of the company that "she did not have to sit there and listen to them accuse her." Her lack of real apprehension is demonstrated by the fact that she left the office where she was being questioned when she wanted to, informed the store officials she was quitting and took the Davy Crockett belt with her when she left the store. Her testimony, when fairly construed, shows she consented to the interrogation.
Submission to the mere verbal direction of an employer, unaccompanied by force or threats, does not constitute false imprisonment. And there is no false imprisonment when an employer declines to terminate an interview of his employee if no force or threat of force is used. False imprisonment may not be predicated on a person's unfounded belief that he was restrained. See, 35 C.J.S. False Imprisonment § 11. We conclude therefore that Mrs. White has failed to prove the essential elements of the alleged tort. 22 Am.Juris., False Imprisonment, Section 4.
Judgment affirmed.
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306 S.W.2d 299 (1957)
Clifford STALLARD et al., Appellants,
v.
Harriet WITHERSPOON, Appellee.
Court of Appeals of Kentucky.
October 25, 1957.
*300 J. L. Richardson, Jr., W. A. Stephenson, Louisville, for appellants.
Julius Leibson, Louisville, for appellee.
WADDILL, Commissioner.
A jury awarded Mrs. Harriet Witherspoon damages in the sum of $2,500 for an injury she sustained as a result of the negligence of the driver of appellants' taxicab. She also recovered $543.85 to reimburse her for payment of certain expenses incurred in the care and treatment of her injury. From a judgment entered accordingly, a reversal is sought by the driver and the owners of the cab on the following grounds: (1) The court erred in overruling their motion for continuance; (2) appellee, Mrs. Witherspoon, was guilty of contributory negligence as a matter of law; (3) the driver of the cab was not guilty of negligence as a matter of law; and, (4) the verdict is excessive.
On December 7, 1955, pursuant to an agreement between the parties, the case was set for trial on February 6, 1956. On the morning of February 6th, Mr. W. A. Stephenson, an attorney who is associated in the practice of law with Mr. J. L. Richardson, Jr., filed his affidavit that the cab company's attorney, Mr. Richardson, was unable to be present due to his participation in the trial of another case in another court. Mr. Julius Leibson, who represented Mrs. Witherspoon, objected to the continuance, and filed his affidavit which stated that he and Mr. Richardson had discussed a possible settlement of Mrs. Witherspoon's case on Saturday, February 4, 1956, and that Mr. Richardson had not indicated he would seek a continuance.
The motion for continuance was overruled, and the court proceeded with the trial after Mr. Stephenson had been given an opportunity to prepare his defense to the suit. The trial court has a broad discretion in granting or overruling a motion for continuance and this Court will not interfere in the exercise of that discretion unless it is clearly abused. Riordan v. Riordan, Ky., 252 S.W.2d 901; Farris v. Evans, 289 Ky. 418, 158 S.W.2d 941. Although the trial court may have been justified in granting the continuance, yet we believe that under the circumstances here shown there was no abuse of discretion in overruling the motion.
The contention that Mrs. Witherspoon was guilty of contributory negligence as a matter of law necessitates a review of the essential facts in the case. On the day of the accident, Mrs. Witherspoon and a woman companion had notified appellants' taxicab to pick them up at a location on Fourth Street in the city of Louisville. Mrs. Witherspoon is a 65-year old diabetic with her right leg off above the knee. When appellants' cab arrived, Mrs. Witherspoon and her companion both state, the driver of the cab opened the front and rear doors of the taxi and pulled Mrs. Witherspoon's wheel chair close to the cab, then helped her out of the wheel chair, and left her standing on her left leg causing her to support herself by holding onto the center post which separates the front and rear doors of the cab. The driver of the cab left her standing in that position while he assisted her companion into the rear seat. The driver then shut the rear door causing Mrs. Witherspoon's left thumb to be mashed between the center post and the hinge of the rear door of the cab. She cried out and the driver immediately opened the door.
The driver of the cab testified that Mrs. Witherspoon "scooted" into the front seat of the cab while he was busy assisting her companion into the rear seat. His testimony in other respects was very similar to that given by Mrs. Witherspoon.
*301 Under the facts and circumstances presented Mrs. Witherspoon was not guilty of negligence as a matter of law. Since it appears that the court submitted the question of her negligence to the jury under a correct instruction, we find no error on this phase of the case. Griffin v. Louisville Taxicab & Transfer Co., 300 Ky. 279, 188 S.W.2d 449; Consolidated Products Co. v. Jackson, 308 Ky. 718, 215 S.W.2d 834.
Appellants insist that the proof failed to establish negligence on the part of the cab driver as a matter of law. Apparently appellants have failed to realize that when they accepted Mrs. Witherspoon as a passenger, it was the duty of the driver of the cab to exercise the highest degree of care to avoid injuring her. Griffin v. Louisville Taxicab & Transfer Co., 300 Ky. 279, 188 S.W.2d 449; Southeastern Greyhound Lines v. Woods, 298 Ky. 773, 184 S.W.2d 93. When this rule of law is applied to the facts in this case, we think the court correctly instructed the jury to the effect that the negligence of the driver of the cab had been established.
It is urged that the verdict is so plainly excessive that it appears at first blush to be the result of passion, prejudice and sympathy on the part of the jury. Three doctors testified that the injury had not healed and the thumb was stiff and permanently injured. They stated that an injury of this character would cause considerable pain and suffering and that Mrs. Witherspoon would be hampered in the use of her crutches. Their testimony further indicates that the healing of the injury will be retarded by her diabetic condition. Consequently, we have reached the conclusion that the medical proof adequately supports the jury's award of damages.
Judgment affirmed.
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251 N.J. Super. 160 (1991)
597 A.2d 567
KELLY HAYES, PLAINTIFF,
v.
STEVEN HAYES, DEFENDANT.
Superior Court of New Jersey, Chancery Division Atlantic County, Family Part.
Decided July 22, 1991.
*161 Mark Vasser for plaintiff.
Steven Hayes, pro se.
*162 SELTZER, P.J.F.P.
This opinion is filed to expand upon the reasons previously given for my refusal to enforce the child-support provisions of a domestic violence order. That refusal has res judicata implications and requires an analysis of the nature of domestic violence proceedings. The present motion arises from the provisions of a final order entered pursuant to the Prevention of Domestic Violence Act, N.J.S.A. 2C:25-1 et seq., as the result of the following history.
On February 19, 1991, plaintiff filed a complaint seeking emergent injunctive relief under the Prevention of Domestic Violence Act. The complaint requested the entry of an order prohibiting defendant from going to plaintiff's residence or place of employment or having contact with her in any way. The complaint did not seek support for either plaintiff or the parties' 18-month-old child, nor did it seek custody of the child. On the same day, after appropriate findings, a temporary ex parte restraining order was entered, N.J.S.A. 2C:25-13(c), granting the requested relief and awarding custody to plaintiff. No child support was ordered. A hearing on the complaint was scheduled for February 28, 1991. Both parties appeared on that date and the hearing was ultimately conducted on March 7, 1991. On that date, 29 other final hearings and 4 contempt trials were also scheduled.
After testimony was received from both parties, a finding of domestic violence was entered. At this point, and for the first time, defendant sought visitation and plaintiff sought child support. Although no such relief had been requested in the complaint and no counterclaim had been filed, the court recognized the nature of domestic violence proceedings and, in effect, treated the requests as cross-motions to amend the pleadings and proceeded to consider the requests. Cf. Maksuta v. Higson, 242 N.J. Super. 452, 577 A.2d 185 (App.Div. 1990). During a brief colloquy in which the court attempted to elicit sufficient facts to permit the entry of some temporary order, the parties *163 advised that there was a support action pending. With the income information gleaned from the participants in the short period of time available, the court entered a final order on March 7, 1991. That order: (1) made the restraints permanent, (2) awarded temporary custody of the minor child to plaintiff subject to specified visitation with defendant, and (3) fixed a weekly support obligation of $45 "until a decision is made in the pending support action."
In fact no such support action was pending. Instead a dissolution action was instituted on April 9, 1991. No further action appears to have been taken with respect to support until June 10, 1991, when plaintiff filed a motion in the dissolution action seeking enforcement of the child-support provisions of the domestic violence order. The motion sought to compel compliance by incarceration, presumably pursuant to R. 1:10-5.
Ordinarily, defendant would be bound by the judgment of a court awarding child support (and, assuming an ability to comply, could be incarcerated until he did so) by virtue of the doctrine of res judicata. That doctrine "as a principal of law bars a party from relitigating a second time that which was previously fairly litigated and finally determined." Charlie Brown of Chatham v. Board of Adjustment, 202 N.J. Super. 312, 327, 495 A.2d 119 (App.Div. 1985). The rule, however, is not absolute. "Among the recognized exceptions to the general rule of preclusion are cases where a new determination is warranted by differences in the quality or extensiveness of the procedures in the two tribunals." Taha v. DePalma, 214 N.J. Super. 397, 400, 519 A.2d 905 (App.Div. 1986). Accordingly, if the child support provisions of the domestic violence order are "final," the order must be enforced it would be, after all, a permanent order modifiable only on a showing of changed circumstances. If it is not a "final" order, it may not be entitled to strict enforcement. I turn, therefore, to a consideration of whether support provisions of domestic violence orders *164 are entitled to the same respect accorded other final support orders.
Domestic violence actions, by their very nature, are heard expeditiously and "frequently are conducted without the formality of counsel." Maksuta v. Higson, supra, 242 N.J. Super. at 454, 577 A.2d 185. For that reason, the technicalities of pleading do not bar relief and litigants should be permitted, as they were here, to amend their pleadings at the time of trial to obtain appropriate relief. Id. at 454-455, 577 A.2d 185. Clearly, the proceedings do not permit a full exploration of the factors fixing child support. In fact, many of the litigants appear, as they did here, to seek child support in an action which may give no notice of the application.
Accordingly, much of the information which is obtained at the hearing is information which the parties did not anticipate providing and which cannot be verified. Indeed, much of it may be unreliable. Moreover, a final order in the domestic violence action could not be entered within the statutorily mandated ten-day period if postponements were granted to ensure a proper discovery period. For example, R. 5:5-2 requires that a case information statement be filed in all contested family actions in which there is any issue as to support. Often, because of the complexity of the financial disclosure required, accurate and complete information may require several weeks to collect. While a support order must be entered to protect the victim and to prevent a hesitancy to use the system for fear of financial distress, we must recognize that the order entered may bear little relation to the appropriate support.
Besides the failure of the parties to prepare for an inquiry leading to a support order, there is a further barrier to an accurate assessment of the parties' financial situation. That barrier is the sheer number of cases which must be determined at any one time. By statute, all final hearings must be heard within ten days of the issuance of the temporary restraining order. N.J.S.A. 2C:25-13(a). This results in the utilization of *165 one day each week to hear the domestic violence cases which have accrued in the preceding ten-day period. The Administrative Office of the Courts reports that of the 22,340 cases which proceeded to a final hearing in the 12 months ending June 30, 1990, 9,099 involved issues of custody.
Accordingly, on any given domestic violence day, courts would be required to make determinations as to support in 40% of the cases. It is unreasonable to expect a full and fair litigation of those issues under such time pressure. Indeed, the overwhelming crush of cases on any given domestic violence calendar day may very well prohibit a reasoned determination of support obligations. Moreover, this problem would almost certainly be aggravated if the domestic violence support provisions were considered "final" and subject to change only on a showing of changed circumstances. In that case, attorneys would almost certainly insist on full hearings and, in the absence of discovery, conduct that discovery on the witness stand thereby extending the length of the hearings and preventing a completion of the calendar.
Because these facts are self-evident, our courts have always recognized that "the support order authorized by the act is intended to bridge the emergent situation and not to be a substitute for other more orderly procedures for support." Mugan v. Mugan, 231 N.J. Super. 31, 33, 555 A.2d 2 (App.Div. 1989). Accordingly, the quality and extensiveness of proof respecting support in a domestic violence action is so superficial that it should not be afforded the finality and deference due an order resulting from a full consideration of the litigants' positions. We must, therefore, consider whether to enforce the order under these circumstances.
Here, plaintiff did not avail herself of the other orderly processes available for fixing support. She delayed any action for a period of four months and then sought defendant's incarceration for his failure to comply with a four-month-old order which may not have been correct initially. Under these *166 circumstances, where there is no certainty that the support order entered fairly represents defendant's obligation and where plaintiff has refused to avail herself of other means of fairly fixing that obligation, the court is under no obligation to enforce it.
This does not mean that plaintiff is remediless or that an emergent order is meaningless. Having received an emergent support order, immediate application may be made to fix that order with the same degree of finality achieved in any support hearing. For example, a complaint may be filed for support simultaneously with the domestic violence complaint. This would institute the normal deliberate fact-finding process resulting in a final support order and it would not effect the temporary domestic violence order. If defendant pays in accordance with the temporary order until the support order is finalized, no problem arises. If the payor fails to pay, a motion may be made in the support action fixing a pendente lite order coextensive with the domestic violence order and relief may be had therefrom. In the typical case, however, support actions are concluded within one month of their institution.
Several factors suggest that requiring the filing of a separate support action is more appropriate than attempting to invest domestic violence support provisions with any degree of finality. We have already seen that domestic violence orders, by necessity, are entered without the considerations we expect to underlie our final orders. If the domestic violence order is invested with the same deference accorded other "final judgments," the support component may not be modified without a showing of changed circumstances. Lepis v. Lepis, 83 N.J. 139, 416 A.2d 45 (1980). This is surely a result we should not seek especially since the provisions of a "final" domestic violence support order could not be modified retroactively. N.J.S.A. 2A:17-56.23a. I note this is true in the converse. It is equally unfair to bind a custodial parent to an unrealistically low order *167 because that parent cannot show a change of circumstances from the entry of the domestic violence restraining order.
Moreover, domestic violence orders are themselves subject to modification by virtue of the acts of the parties. Reconciliation of the parties, for example, acts as a de facto vacation of the order. Mohamed v. Mohamed, 232 N.J. Super. 474, 557 A.2d 696 (App.Div. 1989). Accordingly, if a final support order is entered in a domestic violence case and the parties reconcile, that order (including, presumably, the support provision) would be vacated. Clearly, it would be difficult to have some provisions of a final order remain in effect while others are vacated depending upon the actions of the parties.
Although no reason is apparent for treating domestic violence support orders differently, a quite different result obtains with respect to a regularly entered support order, which is not vacated by the reconciliation of the parties. Rather, a court order is necessary. Cf. Ohlhoff v. Ohlhoff, 246 N.J. Super. 1, 586 A.2d 839 (App.Div. 1991). Experience teaches that temporary reconciliations often occur in domestic violence settings and, accordingly, any attempt to incorporate permanent child support provisions in domestic violence orders runs the substantial risk of administrative difficulty without obtaining any concurrent benefit. The Appellate Division has warned specifically against the utilization of "a stale domestic violence order" as a vehicle for enforcing child support arrears. Mohamed v. Mohamed, 232 N.J. Super. at 475, 557 A.2d 696. The same warning applies here with equal force.
The conclusion that the child support provisions of a domestic violence order should not be enforced, as requested here, is further buttressed by the provisions of N.J.S.A. 2C:29-9, which provides that a knowing violation of any provision in a domestic violence order constitutes a crime of the fourth degree (or in some cases, a disorderly persons offense). That section, however, specifically excludes violations of orders determining child support, child custody, visitation or the like from its ambit. *168 Although there are other provisions for incarceration for failure to follow a court order (specifically R. 1:10-1 through -5 inclusive), it is unreasonable to believe that the Legislature specifically prohibited utilization of contempt proceedings if it contemplated that other incarceration could be used to compel compliance. This demonstrates a legislative recognition of the extremely limited purpose of the child support provisions of a domestic violence order. They are intended solely to protect the custodial parent on an emergent basis.
It is possible, I suppose, to construct a theoretical basis which permits the entry of a "final" support order which is treated differently from any other final order but no benefit is readily apparent from torturing the theoretical underpinnings of our law of support. There is no inconvenience to the litigant who may file the actions simultaneously. What minor administrative duplication occurs is more than offset by practical considerations and theoretical consistency.
In short, there is no reason to treat a domestic violence support order as anything more than a stop gap measure effective only for so long as it takes to institute expeditiously a proper support action and diligently pursue it to a conclusion.[1] Under all of the circumstances, it is unfair to a litigant to enforce the provisions of a domestic violence restraining order where the opportunity to fully and fairly litigate the amount of the child support obligation is not present and where no expeditious attempt has been made by the custodial parent to initiate an orderly and deliberative child-support fixing procedure. The application for enforcement is denied.
NOTES
[1] This conclusion is supported by the recent amendments to the Prevention of Domestic Violence Act which provide in section 13(b)(10). "An order awarding emergent monetary relief to the victim and other dependents, if any. An ongoing obligation of support shall be determined at a later date pursuant to applicable law." Clearly, the amendment recognizes the temporary nature of a support order entered in a domestic violence action and the necessity for further, more deliberative, proceedings.
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409 Pa. Super. 120 (1991)
597 A.2d 690
COMMONWEALTH of Pennsylvania,
v.
Luis A. RIVERA, Appellant.
Superior Court of Pennsylvania.
Argued June 11, 1991.
Filed October 3, 1991.
*123 Dianne M. Dickson, Allentown, for appellant.
A. Renee Smith, Asst. Dist. Atty., Allentown, for Com., appellee.
*124 Before MONTEMURO, BECK and CERCONE, JJ.
CERCONE, Judge:
This is an appeal from a judgment of sentence entered by the Court of Common Pleas of Lehigh County on October 19, 1990. We affirm.
On January 14, 1988, appellant was charged with one count of recklessly endangering another person,[1] one count of aggravated assault,[2] and one count of crimes committed with a firearm.[3] The charge of crimes committed with a firearm was dismissed prior to trial. After a jury trial, appellant was convicted of recklessly endangering another person, but was acquitted of the charge of aggravated assault. Appellant filed post-trial motions in arrest of judgment and for a new trial, which the trial court denied. This timely appeal followed.
Appellant raises the following issues for our consideration:
1. Did the Commonwealth fail to adduce evidence sufficient to support a finding a reckless endangerment beyond a reasonable doubt;
2. Did the court err in permitting the Commonwealth to introduce evidence of prior incidents involving the police and the Riveras [appellant and his wife, the victim];
3. Did the trial court err in affirming the Commonwealth's point for charge number 3;
4. Did the trial court err in permitting Officers Kulp and Serbia to testify as to the content of conversations they had with unidentified passers-by;
5. Did the trial court err in permitting Detective Leh to offer a demonstration using his own personal weapon which was a different make and model from the weapon used on the night in question.
*125 Appellant first argues that the evidence was insufficient to support the conviction of reckless endangerment. Specifically, appellant contends that he shot his wife accidentally and therefore, a conviction of reckless endangerment cannot be sustained. Our standard of review based on the sufficiency of the evidence is quite limited:
The test for sufficiency of the evidence is whether accepting as true all of the evidence reviewed in the light most favorable to the Commonwealth, together with all reasonable inferences therefrom, the trier of fact could have found that each element of the offenses charged was supported by evidence and inferences sufficient in law to prove guilt beyond a reasonable doubt.
Commonwealth v. Lovette, 498 Pa. 665, 669, 450 A.2d 975, 977 (1982); accord Commonwealth v. Robinson, 316 Pa.Super. 152, 155, 462 A.2d 840, 841 (1983).
With our standard of review in mind, we must now look at the facts of this case. The incident from which the charges against appellant emanated occurred in appellant's place of business, Rivera's Bar. Appellant and the victim/wife were in the bar on the night of January 13, 1988. The victim was concerned with a gun appellant had purchased to defend himself and his bar from criminal acts, and requested to see it. Appellant took the gun from its hiding place, placed it into the victim's stomach, and the gun fired. Testimony of investigating officers revealed, that while poking the gun into his wife's stomach, appellant stated, "Don't joke with me because I have a gun." The victim was wounded by the bullet fired from the gun. While various officers testified that the appellant told them he did not know the gun was loaded, Officer David Leh, of the Allentown Police Department testified that appellant admitted loading the gun with two or three bullets two weeks prior to the incident. Moreover, appellant told the officer he did not know how to operate the gun. N.T. 8/9/88 at 134.
The crime of recklessly endangering another person is defined as follows:
*126 A person commits a misdemeanor of the second degree if he recklessly engages in conduct which places or may place another person in danger of death or serious bodily injury.
18 Pa.C.S.A. § 2705. This court has previously had occasion to analyze the sufficiency of evidence necessary to sustain a conviction of reckless endangerment. In Commonwealth v. Trowbridge, 261 Pa.Super. 109, 395 A.2d 1337 (1978), appellant was convicted of reckless endangerment when she pointed an unloaded BB gun at two police officers. We reversed her conviction holding that the mere pointing of an unloaded gun, without more does not constitute a violation of section 2705. Id., 261 Pa.Superior Ct. at 115 n. 11, 395 A.2d at 1340 n. 11. We reasoned that section 2705 requires the defendant to have actual present ability to inflict harm. Because Mrs. Trowbridge was utilizing an unloaded BB gun, we held there was no violation of section 2705.
In the present case, appellant knew the gun was loaded and pointed it directly into his wife's stomach. He committed this act without any knowledge of how the gun operated, so that he might be able to protect his wife from being accidentally shot. We agree with the lower court which found appellant's conduct grossly reckless and sufficient to convict him of the charge under section 2705.
In his brief, appellant argues that the prosecution wavered between whether his conduct was merely reckless or intentional. Thus, he had to refute the prosecution's charge of "intentional endangerment." He argues that both his testimony and that of his wife to the effect that the shooting was accidental precludes a conviction for reckless endangerment based on intentional conduct. This argument is specious. Even if the shooting itself had been accidental, appellant's conduct in pointing the loaded gun at the victim while lacking knowledge to safeguard against possible misfires was sufficient to convict him of reckless endangerment, regardless of lack of intent to cause her harm.[4]
*127 Appellant next argues that the trial court failed to exclude evidence regarding prior incidents between appellant and his wife which required police intervention. Admissibility of evidence is a matter addressed to the sound discretion of the trial court, and an appellate court may only reverse upon a showing that the trial court abused its discretion. Commonwealth v. Claypool, 508 Pa. 198, 203-04, 495 A.2d 176, 178 (1985). The appellate courts in this Commonwealth have consistently held that
evidence of prior crimes and/or acts of violence are inadmissible merely to show the defendant's propensity for violence or bad character.... However, evidence of prior crimes and violent acts may be admissible to prove (1) motive; (2) intent; (3) absence of mistake or accident; (4) common scheme or plan ...; or (5) to establish the identity of the person charged.
Commonwealth v. Banks, 513 Pa. 318, 349-50, 521 A.2d 1, 17 (1987) (citations omitted). The evidence which appellant argues was improperly admitted stems from incidents between appellant and his wife which compelled the police to intervene. The Commonwealth offered this evidence to demonstrate that the hostile relationship between appellant and his wife evidences appellant's intent to shoot his wife. We find this evidence sufficiently falls within the enumerated exception to the rule prohibiting evidence of prior bad acts to show intent.[5]
Appellant next contends that the trial court erred in charging the jury as to the elements of reckless endangerment since it did not comport with the current Pennsylvania law concerning reckless endangerment. In reviewing jury instructions for prejudicial and reversible error, the charge must be read and considered as a whole. Commonwealth *128 v. Woodward, 483 Pa. 1, 4, 394 A.2d 508, 510 (1978). Error cannot be predicated on isolated excerpts; it is the general effect of the charge that controls. Id. If we conclude that the charge was erroneous, we will grant a new trial unless we determine the error to be harmless. Commonwealth v. Story, 476 Pa. 391, 405, 383 A.2d 155, 162 (1978). An error can be harmless only if the appellate court is convinced beyond a reasonable doubt that the error is harmless. Id., 476 Pa. at 405-06, 383 A.2d at 162. Whenever there is a reasonable possibility that an error might have contributed to the conviction, the error is not harmless. Id., 476 Pa. at 409, 383 A.2d at 164. In addition, the trial court's jury instruction will be upheld if it adequately and accurately reflects the law and is sufficient to guide the jury through its deliberations. Commonwealth v. Early, 377 Pa.Super. 219, 227, 546 A.2d 1236, 1240 (1988).
In the instant case, the lower court charged the jury as follows:
Recklessness and danger shall be presumed where a person knowingly points a loaded firearm at or in the direction of another.
N.T. 8/9/88 at 435. We find that the jury charge presented in this case constitutes error. The charge to the jury states that the jury must find recklessness and danger if it finds that appellant knowingly pointed a loaded gun at another person. In Trowbridge, supra, we held:
the crime of reckless endangerment requires (1) a mens rea recklessness, (2) an actus reus some "conduct," (3) causation "which places," and (4) the achievement of a particular result "danger," to another person, of death or serious bodily injury.
Trowbridge, supra, 261 Pa.Super. at 115, 395 A.2d at 1340; 18 Pa.C.S.A. § 2705. Moreover, where the presumed fact comprises an element of the crime charged, the inference authorized by a presumption can never be compelled by the court. Commonwealth v. DiFrancesco, 458 Pa. 188, 193 n. 3, 329 A.2d 204, 207-08 n. 3 (1974). The instruction given by the trial court, without more, required the jury to find *129 appellant guilty if he knowingly pointed a loaded gun at another person. The effect of the charge is to mandate the jury to find that the particular conduct (i.e., knowingly pointing a loaded gun at another) is always committed recklessly. Section 2705, however, states that the conduct must be committed recklessly. Thus, the charge as given, presumes the element of recklessness and danger. It is solely within the province of the jury to find all the elements of the crime present beyond a reasonable doubt.
The Commonwealth urges us to interpret Trowbridge, as holding that recklessness and danger shall be presumed if the defendant knowingly points a loaded gun at another. In contrast, our decision in Trowbridge holds that the legislature, in enacting section 2705, did not intend that the mere pointing of an unloaded weapon should give rise to criminal liability. Id., 261 Pa.Super. at 116, 395 A.2d at 1341 (emphasis added). While knowingly pointing a loaded weapon at another person may be sufficient to convict a defendant for reckless endangerment, we cannot say that such a result is always mandated, as the trial judge instructed in this case. It is the function of the jury to make the ultimate determination.
Despite our finding that the charge was given in error, we nevertheless find that the error was harmless. The charge taken as a whole demonstrates that the jury was obligated to find each element of the crime beyond a reasonable doubt. Further, the jury had before it overwhelming evidence that appellant's conduct was reckless. As we stated above, appellant jokingly pointed a loaded gun at his wife without knowing how the gun operated. The recklessness is demonstrated by his inability to take proper precautions while pointing the gun to ensure it wouldn't misfire.
Appellant next contends that the trial court erred in permitting the attending police officers to testify to conversations between themselves and strangers who apprised them of a fight in appellant's bar. In Commonwealth v. *130 Underwood, 347 Pa.Super. 256, 500 A.2d 820 (1985), we adequately addressed the issue presented here. In Underwood, the appellant argued that statements of two young adults to police officers that "the man running had just robbed somebody," were hearsay statements and therefore inadmissible. We held:
Hearsay is an out of court statement offered to prove the truth of the matter asserted. Hearsay is generally inadmissible as evidence because the competency and veracity of the original speaker are not subject to examination.... It is well settled, however, that an out-of-court statement offered to explain a course of conduct is not hearsay. This court has repeatedly upheld the introduction of out-of-court statements for the purpose of showing that based on information contained in the statements, the police followed a certain course of conduct that led to the defendant's arrest.
Id., 347 Pa.Superior Ct. at 259-60, 500 A.2d at 822 (citations omitted). Instantly, the police offered evidence that two strangers told Officers Kulp and Serbia that a fight was occurring at Rivera's bar. This evidence explained to the jury why they entered the bar. The evidence was not offered to prove that a fight had transpired. Therefore, the evidence was admissible as non-hearsay.
In his final issue, appellant argues that the trial court erred in allowing Detective Leh of the Allentown Police Department to explain to the jury how a .380 caliber pistol, such as the one appellant utilized, is loaded. Appellant objects on the grounds that Detective Leh demonstrated with a Bernadelli .380 caliber pistol, which was a different make and model from his weapon.[6] He argues that because the guns were sufficiently dissimilar, the demonstration was improper. We disagree.
In Commonwealth v. McAndrews, 494 Pa. 157, 430 A.2d 1165 (1981), our supreme court had occasion to address this issue. In that case, appellant, who was on trial for murder, *131 objected to the the admission of a similar weapon to illustrate the testimony of the Commonwealth's ballistics expert. The trial court suppressed the actual murder weapon as fruit of a constitutionally infirm statement appellant gave to police. Id., 494 Pa. at 161-62, 430 A.2d at 1166-67. The court held that the demonstration of a similar weapon was proper where it was used solely to illustrate the expert's relevant testimony. Id.
Instantly, the Commonwealth offered the testimony of Detective Leh to demonstrate how to load and fire a .380 caliber semi-automatic pistol. He used a Bernadelli pistol instead of the Berretta appellant owned. The witness explained that the two pistols loaded similarly and were different only in location of one of the safety catches. Appellant elicited testimony that different sears, or gunlock catches, on each gun might cause the guns to fire differently. The Commonwealth offered the evidence to show that appellant knew how to load and fire the gun, and was offered to rebut appellant's contention that the gun fired accidentally. The trial judge specifically limited Detective Leh's testimony to the proper method for loading the weapon and the path of a bullet into the firing chamber. He excluded testimony on the ease of firing the gun. We find that Detective Leh adequately demonstrated that the two weapons were sufficiently similar for purposes of this demonstration. The demonstration was therefore appropriate under McAndrews, supra.
Judgment of sentence affirmed.
NOTES
[1] 18 Pa.C.S.A. § 2705.
[2] Id. § 2702.
[3] Id. § 6103.
[4] Moreover, we find that the prosecutor's apparent vacillation over whether appellant's conduct was intentional or reckless was conduct consistent with her attempt to prove both the charges of aggravated assault and reckless endangerment.
[5] Regardless of our finding, we fail to see how appellant was prejudiced by this evidence. The Commonwealth proffered the evidence to show that appellant intentionally shot his wife. However, appellant was acquitted of the charge of aggravated assault. That was the only charge for which this evidence was relevant.
[6] The police were unable to locate appellant's weapon after the shooting occurred.
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306 S.W.2d 790 (1957)
TEXAS & NEW ORLEANS RAILROAD COMPANY, Appellant,
v.
L. B. JACKS, Appellee.
No. 6130.
Court of Civil Appeals of Texas, Beaumont.
October 24, 1957.
Rehearing Denied November 20, 1957.
*791 Keith, Mehaffy, McNicholas & Weber, Beaumont, for appellant.
Jacobs & Schmidt, Houston, for appellee.
R. L. MURRAY, Chief Justice.
Appellee Jacks sued appellant Texas & New Orleans Railroad Company for damages for injuries suffered by him in a fall from a moving railroad car while he was working as an employee of the appellant. He sued under the provisions of the Federal Employers Liability Act, (Sec. 51, Title 45 U.S.C.A.) as supplemented by the Safety Appliance Act (Sec. 4, Title 45 U.S. C.A.) On the day when the cause went to trial the appellant filed an instrument admitting pertinent facts showing liability of the appellant to the appellee, and the cause was tried before a jury upon the sole issue of fact as to the amount of monetary damages suffered by the appellee in the premises. In his petition the appellee sought damages in excess of $144,000. The jury by its verdict found that he had suffered damages in the sum of $81,000.
Judgment was rendered and entered in behalf of appellee and against the appellant for the sum of $81,000. The appellant filed its motion for new trial and amended motion for new trial, which amended motion was overruled by the trial court. The appellant has duly perfected its appeal to *792 this court and brings its appeal under five points of error. Such points read as follows:
First Point
The trial court erred in forcing the defendant to trial when the jury panel from which the parties were required to select a jury had been depleted by unauthorized excuses by divers persons, thereby subjecting the defendant to a trial by a jury not selected in accordance with law.
Second Point
The court erred in refusing to permit the defendant to elicit from plaintiff the fact that he was not willing to relinquish his re-employment rights with the defendant notwithstanding his claim of total and permanent disability.
Third Point
The court erred in permitting the plaintiff to establish the cost to plaintiff of a single-premium annuity over the objection of the defendant.
Fourth Point
The trial court erred in refusing to grant the defendant a new trial because of the improper and inflammatory argument of plaintiff's counsel.
Fifth Point
The trial court erred in refusing to grant the defendant a new trial because the verdict of the jury was excessive under the circumstances.
The basis of appellant's first point is the action of the trial court in overruling its motion to quash the jury panel. Such motion alleged in substance as follows:
There were selected from the jury wheel of this county, the names of 200 persons who were each summoned to do jury service in the District Courts of Jefferson County, Texas, for the week beginning October 15, 1956; of said number 69 swore in as jurors available for service in all of the courts of this county for said week. This defendant says that the list submitted to it from which it must select a jury in this cause was not drawn in accordance with the applicable statutes and rules governing the selection and empanelment of juries in this county as will be shown hereinafter.
Defendant verily believes that many persons were excused from attendance by an unauthorized person: namely the sheriff of Jefferson County, Texas, or his deputies. In support of this allegation, the defendant says that it verily believes that the following persons were excused from attendance upon this court by said sheriff: (Here follow the names of eight persons, together with the numbers by which they appeared on the jury panel list for the week).
The motion next alleged that numerous other jurors were excused by divers and sundry persons without lawful excuse and alleged the names and numbers of 85 persons alleged to have been wrongfully excused.
Appellant further alleged as follows:
In the alternative, and in the event the proof does not establish that some unauthorized person excused each of the jurors named in the foregoing paragraph, then and in such event, defendant says that said persons were lawfully summoned for jury service and did not appear and no process was issued to compel their attendance; and by reason of such facts, the same amounts to an unauthorized excuse of said jurors.
Still furtherthis defendant says that at the time the court empaneled said jury for the week, 24 jurors were excused and many without lawful excuse, and upon this point defendant proffers testimony to show that there has been an abuse of discretion in the release of said jurors from service.
This defendant says that it is entitled to a jury selected in accordance with law and is entitled to have a panel selected at random from all of the jurors summoned for the week from the jury wheel; that of *793 202 names upon the list, only 69 were sworn as jurors to try causes, 131 being excused for one or another reason; that the remaining jurors were truly and in fact volunteer jurors.
Wherefore, premises considered, defendant prays that the said panel be quashed; or in the alternative, that the absent jurors and those without lawful excuse be brought before this court and their qualifications tested in accordance with law and that this defendant be afforded a panel of qualified jurors who have not been arbitrarily and unreasonably excused from service.
This motion was verified by affidavit of counsel and the court heard extensive evidence upon the motion. From such evidence it was adduced that the names of 200 persons had been drawn from the jury wheel for service as petit jurors for the week beginning October 15, 1956, and that only 69 were actually sworn in as jurors available for service in the courts of Jefferson County for that week. Many prospective jurors whose names were drawn were excused by the sheriff, and others were excused by the clerk, many were not excused and did not appear, and others were excused by the presiding judge when the jury for the week was empaneled. The prospective jurors appeared before a district judge other than the one presiding in the district court where the instant case was tried.
The appellant complains in its motion for new trial and in its brief here of the fact that some 66 jurors were excused prior to appearance before the court and not one of them filed affidavits of exemption. It complains that no authority has been found authorizing the sheriff or district clerk to excuse jurors from service, and complaint is also made of the refusal of the trial court to enforce obedience to the summons upon the persons whose names were drawn but who ignored the processes of the court. Appellant contends that it was thus confronted with a voluntary jury and was deprived of its right to have all the prospective jurors available from which to strike its list in selecting a jury to try its case.
It is clear from the holding in Ulmer v. Mackey, Tex.Civ.App., 242 S.W.2d 679, and from the statutes regulating the selection of persons for jury service, that the district clerk and sheriff are without lawful authority to excuse jurors. Such a holding, however, does not answer the question involved in this point of the appellant, that is, whether the appellant was entitled to the relief which it sought from the trial court in its motion to quash the jury panel and whether the trial court's action in overruling such motion to quash constitutes reversible error.
The courts of Jefferson County operate under the provisions of the Interchangeable Jury Law, Art. 2101, Vernon's Annotated Civil Statutes. Such statute provides that a majority of the district judges are authorized to act in carrying out the provisions of this law; they may increase or diminish the number of jurors selected for any week, and shall order said jurors drawn for as many weeks in advance of service as they deem proper. From time to time they shall designate the judge to whom the jury panel shall report for duty, and said judge, for such time as he is chosen to so act, shall organize said juries and have immediate supervision and control of them. The said jurors so limited in number shall, after being regularly drawn from the wheel, be served by the sheriff to appear and report for jury service before said judge so designated, who shall hear the excuses of said jurors and swear them in for service for the week that they are to serve to try all cases that may be submitted to them in any of said courts. Said jurors, when empaneled, shall constitute a general panel for the week, for service as jurors in all county and district courts in said county, and shall be used interchangeably in all of the said courts.
We believe that under the above statute the district judge designated as the *794 one to whom the general jury panel shall report for duty is charged with the duty and clothed with the authority to organize the jury for the week. Any objection to the organization of the jury panel for the week should be made to him at the time he makes such organization.
The jury wheel law has no clause to the effect that failure to comply with any of its provisions shall be cause for challenge to the array, and we must look to the former law for the rule on that subject, which is found in Article 3202, Rev. St.1895. Freeman v. McElroy, Tex.Civ. App., 149 S.W. 428. This is now Rule 221, Texas Rules of Civil Procedure. This rule simply provides that when jurors are summoned who have not been selected by jury commissioners or by drawing the names from a jury wheel, any party to a suit which is to be tried by a jury may, before the jury is drawn, challenge the array upon the ground that the officer summoning the jury has acted corruptly, and has willfully summoned jurors known to be prejudiced against the party challenging or biased in favor of the adverse party. This rule obviously has no application here, since the names of the jurors were drawn from the jury wheel and there is no charge that any officer concerned acted corruptly.
We are of the opinion that the appellant here has not shown itself to have been in position to seek the relief sought by its motion to quash the jury panel after the jury for the week had been organized by one of the district judges of Jefferson County other than the one who sat in the trial of this case, and after the panel of 31 eligible jurors were sent to this district court as a panel of jurors for trial of cases in this court. Such objections and requests as the appellant made here in its motion to quash are required to be made before the judge designated to organize and empanel the jury for the week. The language of the statute, while not saying so specifically, contemplates that all matters relating to the organization of the jury for the week for the courts of the county shall be presented to the one district judge before whom the jurors report for service and before whom excuses and qualifications of the jurors are determined. When he has heard and passed upon the excuses and qualifications of the jurors, and has organized and empaneled the jury for the week, the jury for the week has been organized, and no attack upon such organization can be made thereafter. The words, "Said jurors when impaneled shall constitute a general panel for the week", appear to give authority for such view and holding. Appellant's first point presents no reversible error and it is overruled.
The appellant's second point deals with the action of the trial court in sustaining an objection by appellee's counsel to a question asked appellee while a witness on the trial of the case. The appellee had testified as to his injuries and his physical condition at the time of the trial and the following cross-examination took place:
"Q. As I understand your testimony here you do not believe that you could ever return to work as a brakeman or switchman? A. No, sir. I am afraid not.
"Q. Well, are you now willing to relinquish your seniority rights?
"Mr. Schmidt: We object to that, your Honor, it is not in the lawsuit.
"The Court: The objection is sustained.
"Mr. Keith: Note our exception.
"Q. Do you expect to return to work for the railroad? A. I don't thinkI won't get able. I won't get where I can.
"Q. Is it your testimony that you never expect to return to work for the railroad in any capacity? A. Not unless I get better than I am."
Under this point appellant says that it was thus denied the right to elicit from the appellee himself the fact that notwithstanding his condition and his contention that he was totally and permanently disabled *795 from doing his usual and customary work, he would not relinquish his seniority and re-employment rights with the appellant. It argues that had the court permitted him to secure an answer from the appellee that he was not willing to give up his seniority and re-employment rights with the railroad, it could have argued to the jury that such unwillingness meant that the appellee himself did not in truth and in fact believe that he was totally and permanently disabled. It says that this was a legitimate cross examination, since it included a relevant fact and points out that our courts permit a wide latitude in cross-examination. It cites and relies upon Radford v. Hill, Tex.Civ.App., 185 S.W.2d 129 and Texas & N. O. Railroad Co. v. Barham, Tex.Civ.App., 204 S.W.2d 205. In appellee's reply to this argument it is noted that he nowhere in his pleadings alleged that he was totally and permanently disabled and that there is no testimony of any witness that appellee is totally and permanently disabled.
There is no showing by a bill of exception or otherwise what the answer of the witness would have been if the trial court had permitted him to answer the question. Where such a ruling excludes evidence it must be shown what the proffered evidence is or what the expected answer of the witness would have been. McCormick & Ray, Texas Law of Evidence, Second Edition, Vol. 1, Sec. 32, citing Johnson v. Poe, Tex.Civ.App., 210 S.W.2d 264; Texas Associates v. Joe Bland Construction Co., Tex.Civ.App., 222 S.W.2d 413; Bradford v. Magnolia Pipe Line Co., Tex. Civ.App., 262 S.W.2d 242.
In the absence of such a showing of what the answer of the witness would have been, this point presents no error and it is overruled. If it be assumed, however, that the witness would have given a negative answer to the question, we do not believe that the trial court erred in sustaining the objection of the appellee. The seniority rights of the appellee with his employer are not inherent in the employment relationship, but arise out of and exist only by reason of contract. Trailmobile Co. v. Whirls, 331 U.S. 40, 67 S. Ct. 982, 91 L. Ed. 1328, and cases cited. It appears to be immaterial to any issue in this case, whether appellee's disability is permanent or not, whether he was willing to forego his seniority rights, speculative and uncertain though their value may be.
Under its third point the appellant complains of the trial court's action in permitting appellee to establish by evidence the cost to him of a single-premium annuity. A local insurance agent testified from mortality tables that life expectancy of a white male, age 48 years was 22.88 years, while that of a 47 year old white male would be 23.65 years. Appellee was 47 years old at the time of the trial. No objection was made to such testimony. Following this question, however, the following question was asked and objection made by appellant:
"Q. All right. Now, Mr. Quartararo, can you state, or can you tell me the cost of an annuity policy with your Company (Pan American Life Insurance Company) a one-payment annuity policy that would pay the insured, or guarantee him, or pay him for a period of twenty-two (22) years the sum of $400.00 per month? Can you tell me the cost of such a one-premium policy?
"Mr. Keith: We would have objection, if the Court please, that is not a proper element of damage, it is speculative as to that this particular company would sell any individual a particular policy is not the controlling factor, and isn't even persuasive in this, there is no showing that is the common, the usual or ordinary charge, there are not other companies would sell it for less, and for the additional reason the life insurance companies *796 are prohibited by law to pay an interest rate comparable to the going rate for money.
My additional objection is the evidence does not show that the man is totally and permanently disabled, under the testimony of Dr. McGee.
My additional objection for the additional reason that the testimony in this case most favorably considered from the plaintiff's standpoint does not indicate that the plaintiff will be totally and permanently disabled from the effects of the alleged injury, but on the contrary a reasonably simple operation would result not only in partial disability but consequently the value of an annuity predicated upon a complete or total loss of earning capacity would not be supported by any competent evidence in this record."
The objection was overruled and the witness testified that as to a single-premium annuity it would cost $2,098 for each $10 per month income; that an income of $400 per month would be roughly $84,000; that the cost to guarantee him $100 per month would be $21,000; $200 per month $42,000; a guarantee of $300 per month, $63,000 and that to guarantee him $500 it would cost him $105,000. The appellant's objections to such testimony are summarized by it in its brief, as follows: (a) It is not a proper element of damage; (b) it is speculative as to what this particular company would sell any individual a particular policy; (c) there is no showing that it is a common, usual or ordinary charge; (d) it is not based upon an interest rate comparable to the going rate for money; (e) it assumes total and permanent disability. The witness's annuity was based upon a discount rate of 2½ per cent, while government bonds were then paying 3 per cent. Another witness testified that the safe interest rate in Jefferson County, Texas was 3 per cent and added that he could loan money at better than 6 per cent in investments considered safe. This witness also testified that a reasonably prudent investor, seeking neither the maximum return or the maximum safety could invest his money then in Jefferson County at a rate in excess of 5 per cent. Standard Life & Annuity tables and the present cost of a life annuity are competent evidence to assist the jury in making an estimate of a plaintiff's loss and damage in money as a fair recompense for the loss of what would otherwise have earned in his trade or profession and has been deprived of the capacity of earning. Vicksburg & Meridian Railway Co. v. Israel Putnam, 118 U.S. 545, 7 S. Ct. 1, 30 L. Ed. 257, and cases cited; Southern Pacific Co. v. Klinge, 10 Cir., 65 F.2d 85. From these authorities it is clear that the testimony complained of was admissible. The evidence and objections in regard to discount rates and prevailing rates of interest in Jefferson County do not affect the admissibility of this evidence, but are for consideration by the jury in deciding upon the weight to be given such other evidence as to cost of the annuity. This point presents no error and it is overruled.
By its fourth point the appellant complains of argument of appellee's counsel in addressing the jury, and says such argument was improper and inflammatory. The portions of the argument complained of were as follows:
"Again, I want to thank you for your kindness, your attention you gave to Mr. Keith the same attention you gave to me, and I appreciate it particularly because you could see the palpable shame of a man that will stand before you and prate of fairness and at the same time indicate how grossly unfair he is * * *"
"* * * And you talk about fairness, and he misrepresents everything he can possibly misrepresent to you * * *"
"* * * but when you fix it so that damages will be awarded to him *797 will take him off the relief rolls, and take him and put him where he can have at least the courage to face his fellow man and say, `I am not a charge on public charity' * * *"
This point presents no error. The first portion of the argument complained of by appellant was made without objection on the part of appellant and it does not appear to be such a vicious and violent attack upon counsel that it could not have been corrected by the trial judge if an objection had been made. The evil in the argument, if any, could have been corrected by an instruction from the court. J. D. Wright & Son Truck Line v. Chandler, Tex.Civ.App., 231 S.W.2d 786; Ramirez v. Acker, 134 Tex. 647, 138 S.W.2d 1054 and cases cited; Wade v. Texas Employers Ins. Ass'n, 150 Tex. 557, 244 S.W.2d 197.
As to the other two portions of the argument complained of, the trial court sustained objections and instructed the jury to disregard the quoted portions of the argument. As we view it, such an instruction by the court cured whatever error there was in making such argument. See King v. Federal Underwriters Exchange, 144 Tex. 531, 191 S.W.2d 855; Lumberman's Lloyds v. Loper, Tex., 269 S.W.2d 367.
Appellant's fifth point complains that the jury's verdict and the court's judgment in the sum of $81,000 was excessive.
The amount of the judgment is large and because of the size of the judgment it is necessary to set out a summary of the evidence adduced. Appellee was 45 years old at the time of his injuries and had worked for the appellant for over 22 years. He was a brakeman and had been promoted to conductor in 1948, from which time he worked as brakeman and extra conductor. His earnings prior to the injuries were for 1952, $6,284.15; 1953, $5,944.60; 1954, $5,289.30. He had a life expectancy of 22.88 years at the time of the trial. When he fell from the moving freight car and was injured, he suffered bruises on his left elbow, right knee and leg, a knot on his head and skinned places on his leg. His spine and injured and after treatment at Southern Pacific hospital in Houston he has worn a brace all the time. His use of his legs and back is greatly restricted and he is in continuous pain and nervousness. He has a ruptured disc in his back and a mild curvature of the lumbar section of his spine. There are subluxations in the lower part of his spine, particularly between the fifth lumber vertebra and the sacrum. This condition of the spine could probably be cured or improved by a major surgical operation, in which two discs of the spine would be removed and three joints in the back would be fused, either with bone from the patient himself or from a bone bank, or with the use of a metal plate. He will be unable to do hard work for a long time.
He has lost approximately two years wages up to the time of trial. We are unable to say that under the evidence the allowance made by the jury in its verdict and incorporated in the judgment of the court was excessive. We have read the case of Thompson v. Barnes, Tex.Civ.App., 236 S.W.2d 656 and a number of the later cases cited by both parties here. The Barnes case holds a judgment of $85,000 for the injuries to a railroad conductor is not excessive. It cites in the opinion numerous other cases relied upon by the appellee in his brief here, sustaining large judgments for personal injuries. We have also examined numerous authorities set out in 16 A.L.R.2d in the annotation running from Page 3 to Page 458, and from all the authorities read and examined we see again the observance of the general rule in such matters that the amount of damages to be awarded for personal injuries is primarily a question of fact for determination by the jury and the courts will not interfere to set aside or reduce such judgments and *798 verdicts when they have support in the evidence, in the absence of any showing of bias, passion or prejudice.
In the instant case the jury had before it evidence of loss of wages at the time of trial, the probable loss of wages for a number of years to come, and extensive pain and suffering on the part of the appellee. We are unable to agree with the contention of the appellant that the amount of the judgment is out of proportion to the damages and injuries shown by the evidence and the appellant's fifth point is overruled.
We find no error presented and the judgment is accordingly affirmed.
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205 B.R. 88 (1997)
IN RE IPS SYSTEMS, INC., Debtor.
Bankruptcy No. 95-47133-H5-11.
United States Bankruptcy Court, S.D. Texas, Houston Division.
February 13, 1997.
Martyn B. Hill, Houston, TX, for debtor.
R. Andrew Black, Trustee, Houston, TX.
ORDER REGARDING MOTION TO RECONSIDER AND CLARIFY THE COURT'S ORDER DENYING MOTION FOR DISTRIBUTION OF RETAINER
KAREN KENNEDY BROWN, Bankruptcy Judge.
Before the Court is Counsel for Debtor's Motion to Reconsider and Clarify the Court's Order Denying Motion for Distribution of Retainer Pursuant to Rules 8002(b)(4) and 9024, filed by Pagel Davis & Hill, P.C. ("PDH"). This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§ 1334 and 157(b).
Debtor filed this bankruptcy as a chapter 11 proceeding on September 15, 1995. Prior to the filing of this chapter 11 bankruptcy for debtor, PDH received from debtor $40,000.00. PDH initially represented to this Court that the entire sum was held as a retainer for future legal services on debtor's behalf. Subsequently, PDH has explained that from this sum, prior to the filing of the bankruptcy, it paid itself $13,906.00 for its prepetition legal services provided to debtor and held on the filing date $25,280.00 as a trust retainer. PDH has never explained the disposition of the difference between these sums of $814.00.[1]
This case was converted to chapter 7 on December 21, 1995, and the chapter 7 trustee was appointed. PDH filed its motion to distribute retainer on March 12, 1996, claiming it incurred $80,057.00 in legal fees from the beginning of the chapter 11 and seeking to distribute to itself the entire retainer in partial payment of this sum. The chapter 7 trustee claimed the retainer as property of the estate and sought turnover from PDH. LaSalle National Bank contended that by virtue of the cash collateral order entered in the chapter 11 proceeding, it was granted a replacement lien on all of debtor's monies and, therefore, it controlled the use of those funds. LaSalle consented to the use of the funds for payment of these counsel fees, but if not used to pay counsel fees, it demanded turnover of the funds to itself. The Texas *89 Comptroller did not object to the allowance of PDH's fees and expenses but contended that the fees should be paid directly by LaSalle rather than from estate funds. The Texas Comptroller contended that all of debtor's counsel's actions benefitted only LaSalle; therefore, its collateral should be surcharged for these fees under 11 U.S.C. § 506(c).
By Order entered July 29, 1996, this Court disposed of the claims of the various parties and held that the motion for distribution of retainer was denied; that the Texas Comptroller's motion to surcharge LaSalle's collateral contained in the Texas Comptroller's Response and Request for Hearing on Motion to Distribution of Retainer was denied; that any lien claimed by LaSalle National Bank on the retainer was waived; and that Pagel Davis & Hill, P.C. shall turn over the debtor's $40,000.00 retainer to the chapter 7 trustee for distribution in accordance with 11 U.S.C. § 726.
Subsequently, in order to obtain final allowance of its fees as a claim against the estate, PDH filed a fee application as required by Fed.R.Bankr.P. Rule 2016. PDH sought approval of $72,196.00 in compensation and $8,958.97 in reimbursement of expenses for the time period of September 15, 1995 to December 21, 1995, the date of conversion to chapter 7. This Court ordered allowance of fees in the amount of $55,000.00 plus reimbursement of expenses in the amount of $8,958.97. PDH moves the Court to reconsider its prior order in so far as it denies PDH a security interest in the retainer and requires PDH to turnover its retainer to the trustee.
A retainer becomes property of the estate upon the filing of a bankruptcy. "The general rule in Texas and elsewhere, is that a retainer is held in trust, as property of the client, until applied to the bill of the attorney. This will mean that such retainers are, in the usual case, property of the bankruptcy estate." In re Office Products of America, Inc., 136 B.R. 964 (Bankr.W.D.Tex.1992). Texas Business and Commerce Code section 9.203(a) provides that a security interest does not attach unless the collateral is in the possession of the secured party pursuant to agreement, value has been given, and the debtor has rights in the collateral. Tex.Bus. & Comm.Code § 9.203(a). The Bankruptcy Code provides for Court review and approval of professional fees sought to be charged against the estate. 11 U.S.C. § 330. The Court finds that at the initiation of this bankruptcy, PDH held the retainer pursuant to agreement and that debtor had rights in the collateral.
Whether value has been given by PDH to the debtor for purposes of attachment of a security interest to the retainer as of that date, however, requires closer analysis. At first blush, it appears that value is given incrementally over time post-petition as the law firm performs legal services on the debtor's behalf. The automatic stay of 11 U.S.C. § 362 would preclude attachment of a security interest in property of the estate post-petition as work is performed on the debtor's behalf. Likewise, PDH lacks a court order granting it a post-petition security interest in the retainer fund. Thus, in order to meet the requirements for attachment of a security interest, value must have been given pre-petition for the post-petition work. The Court finds that the agreement of a law firm to represent the debtor through the bankruptcy case in accordance with all professional and ethical precepts is value for purposes of attachment of a security interest. Any such security interest is explicitly subject to later review by the bankruptcy court in accordance with the Bankruptcy Code. Accordingly, the Court concludes that PDH may retain its retainer and apply it to its approved fees.
Based on the foregoing, it is
ORDERED that this Court's Order entered July 29, 1996, is reaffirmed in all respects except as provided herein; it is further
ORDERED that PDH may apply its retainer to its approved fees; it is further
ORDERED that PDH is not required to turnover the retainer to the Chapter 7 trustee.
NOTES
[1] If $800.00 was the filing fee, there remains a discrepancy.
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306 S.W.2d 388 (1957)
Mabel E. CROSSLEY, Appellant,
v.
Luther V. CROSSLEY, Appellee.
No. 13220.
Court of Civil Appeals of Texas, San Antonio.
October 16, 1957.
Rehearing Denied November 6, 1957.
*389 Joe Burkett, San Antonio, for appellant.
Luther M. Bickett, San Antonio, for appellee.
POPE, Justice.
Appellant, Mabel E. Crossley, has appealed from a decree for divorce in favor of her husband. After the court entered the decree, appellant employed different counsel, who filed a motion for new trial which was denied. Appellant urges as ground for a reveral (1) that general allegations of cruelty will not support a decree; (2) that there was not full and satisfactory evidence in support of the divorce, and (3) that the court erred in refusing to compel the appellee husband to give testimony on oral deposition after the trial, and also in refusing to permit the introduction of testimony on the motion for new trial. The points have no merit.
The general allegations of cruelty were sufficient in the absence of a special exception. McCullough v. McCullough, 120 Tex. 209, 36 S.W.2d 459; Kollenborn v. Kollenborn, Tex.Civ.App., 273 S.W.2d 660; Blackburn v. Blackburn, Tex.Civ.App., 163 S.W.2d 251.
The evidence which supports the decree shows that the parties have been married since 1932, they have no children, and they separated three times before the divorce action. The wife harassed the husband continually and was critical of all his actions. She falsely accused him of infidelity, told him she cared nothing whatsoever for him, and on one occasion called him vile and profane names. The husband suffers from a heart condition, is unable to sleep, is sick and nervous, and that condition, according to the husband, was caused by his wife's conduct toward him. The husband is unable to work because of the condition of his health. He stated that they definitely can not live together again. The wife disputed all of these charges, but we are unable to say that the decree does not have full and satisfactory support. Crum v. Crum, Tex.Civ.App., 282 S.W.2d 280; Young v. Young, Tex.Civ.App., 257 S.W.2d 443; Grisham v. Grisham, Tex.Civ. App., 255 S.W.2d 891; Blackburn v. Blackburn, supra.
After the trial and after the decree was entered, appellant sought to take appellee's oral deposition but he refused to be sworn. On a hearing of a motion for new trial appellant endeavored to testify and also to call appellee for the purpose of cross-examining him. The court did not permit either to testify. This is assigned as error. Appellant does not assert that she discovered anything new or different from what she either testified about or could have proved on the trial of the case. A motion for new trial is not a vehicle through which the case may be tried over or tried differently. She does not contend that there is any newly discovered evidence. The court properly refused to reopen the case. 4 McDonald, Texas Civil Practice, Sec. 1816.
The judgment is affirmed.
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91 N.J. Super. 81 (1966)
219 A.2d 200
THE NEW JERSEY SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS, A BODY POLITIC, BY CAPTAIN FRANK TOMASULO, PLAINTIFF,
v.
THE BOARD OF EDUCATION OF THE CITY OF EAST ORANGE, A BODY POLITIC, DEFENDANT, NEW JERSEY SCIENCE TEACHERS' ASSOCIATION, A NON-PROFIT CORPORATION OF THE STATE OF NEW JERSEY, AND NATIONAL SOCIETY FOR MEDICAL RESEARCH, INC., A NON-PROFIT CORPORATION OF THE STATE OF MINNESOTA, INTERVENORS.
Superior Court of New Jersey, Essex County Court, Law Division.
Decided April 4, 1966.
*84 Mr. Nicholas Martini for plaintiff (Mr. Sam Weiss, on the brief).
Mr. Charles C. Trelease, amicus curiae, for The American Humane Association.
Mr. Edward Stanton for the Board of Education of East Orange.
Mr. Frank L. Bate for New Jersey Science Teachers' Association and National Society for Medical Research, Inc. (Messrs. Shanley & Fisher, attorneys; Mr. Raymond W. Young, of counsel).
BARRETT, J.C.C.
In this action The New Jersey Society for the Prevention of Cruelty to Animals (S.P.C.A.) under N.J.S.A. 4:22-26 seeks recovery against the Board of Education of the City of East Orange (board) of penalties at the rate of $100 per alleged violation arising primarily out of cancer-inducing experiments conducted by a student in its high school on live chickens. By permission of the court, defendants New Jersey Science Teachers' Association and National Society for Medical Research, Inc. were permitted to intervene as party defendants. The American Humane Association was permitted by the court to participate as amicus curiae.
To my mind, the two primary issues are whether the provisions of N.J.S.A. 4:22-16(a) deny the board any power and discretion to permit high school students to undertake learning experiences involving ostensible pain or suffering of a chicken, and whether the board, by its servants or agents, inflicted unnecessary cruelty or otherwise needlessly mutilated or killed live animals, namely chickens, contrary to the provisions and intendment of N.J.S.A. 4:22-26(a) and (c).
Adopted in 1880, and amended in minor respects in 1915, the statute involved deals, according to its heading, with the prevention of cruelty to animals, and specifies "animal or *85 creature" as including the whole brute creation (N.J.S.A. 4:22-15). The legislative history of the enactment is meager and unrewarding.
The following section, N.J.S.A. 4:22-16, and one which requires construction as to its application to the instant case, reads:
"N.J.S.A. 4:22-16. Construction of article
Nothing contained in this article shall be construed to prohibit or interfere with:
a. Properly conducted scientific experiments performed under the authority of the state department of health. That department may authorize the conduct of such experiments or investigations by agricultural stations and schools maintained by the state or federal government, or by medical societies, universities, colleges and philanthropic institutions incorporated or authorized to do business in this state and having among their corporate purposes investigation into the causes, nature, prevention and cure of diseases in men and animals; and may for cause revoke such authority;
b. The killing or disposing of an animal or creature by virtue of the order of a constituted authority of the state;
c. The shooting or taking of game or game fish in such manner and at such times as is allowed or provided by the laws of this state."
The next section, N.J.S.A. 4:22-17, among other provisions, makes one who inflicts unnecessary cruelty upon a living animal or creature of which he has charge guilty of a misdemeanor, punishable by a fine of not more than $250, or imprisonment for not more than six months, or both, in the discretion of the court.
N.J.S.A. 4:22-26, as to the prohibited acts charged here, in so far as relevant reads:
"A person who shall:
a. Overdrive, overload, drive when overloaded, overwork, torture, torment, deprive of necessary sustenance, or cruelly beat or otherwise abuse or needlessly mutilate or kill a living animal or creature;
* * * * * * * *
c. Inflict unnecessary cruelty upon a living animal or creature of which he has charge or custody or either as owner or otherwise, or unnecessarily fail to provide it with proper food, drink, shelter or protection from the weather; * * *" (Emphasis added)
Broadly stated, plaintiff contends that no one but the State Department of Health can give authority for conducting *86 animal experiments and that the Health Department can grant authority for such experiments only to the entities named in N.J.S.A. 4:22-16 (a). S.P.C.A. argues that it was the intention of the Legislature to limit these experiments solely to the groups mentioned in the section. Therefore, anyone conducting scientific experiments on live animals without authorization from the Department of Health should be subject to the penalties set forth in N.J.S.A. 4:22-26, for the acts constituting cruelty; in other words, scientific experiments, even if properly performed, would per se constitute unnecessary cruelty or needless mutilating or killing. If the court does not accept this position, S.P.C.A. further asserts there was a violation of that section in that there was in fact a needless mutilation or killing and an unnecessary cruelty, as proved by the nature of this particular experiment or the manner in which it was carried out.
Again, broadly stated, defendants assert that N.J.S.A. 4:22-26 does not apply to it, and that, assuming cruelty or mutilation and admitting killing, such acts were not needless and were not unnecessary, considering the purposes and goals of the experiment, and the manner in which it was carried out. In the event defendants' contentions, as just stated, are not upheld, they argue that other defenses arise, such as the unconstitutionality of the statute.
My first obligation is to interpret the statute.
Oscar Sussman, a veterinary doctor who is chairman of the Department of Veterinary Medicine in the State Department of Health, testified for the defense that only 26 institutions[*]*87 in this State had applied for and obtained authorization to perform scientific experiments under N.J.S.A. 4:22-16, the majority of which are hospitals, with some commercial research institutions (part of whose corporate affiliates are in the food and drug field). Only two institutions of higher learning, Jersey City State College and Seton Hall Medical School (now a state school), are in the group. Rutgers, the State University, has its application pending. Dr. Sussman estimated that 300 or 400 other institutions or people, in addition to high schools and institutions of higher education, are presently conducting live animal experiments in the State, and that his department considers it none of its business. On the contrary, it favors live animal experiments in high schools, and Dr. Sussman believes the experiment here was both needed and was carried out properly. In fact, his department, in conjunction with the New Jersey Department of Education and the American Cancer Association in 1963 sponsored "Smoking and Lung Cancer," a teaching and reference guide for schools from grade level 5 through the senior college year; and among other experiments recommended for children in high schools is the placing of nicotine tars on shaved skin on the backs of laboratory mice, with this experiment to run for six months so as to form tumor or lesion formation. Included in the suggested technique is the microscopic examination of the growth of cancerous cells, if the mouse is sacrificed.[1]
The view of the Department of Health should perhaps be given some significance. It is well established that resort may be had to long usage and practical interpretation by an administrative agency in construing statutes to ascertain their meaning, to explain a doubtful phrase, or to illuminate any obscurity. The lack of interference by the Legislature over a period of years is evidence of its conformity *88 with the legislative intent and strongly inclines the courts to concurrence therein. Lane v. Holderman, 23 N.J. 304, 322 (1957); State v. Hubschman, 81 N.J. Super. 452, 459 (1963).
Regardless of whether the principle of law just enunciated applies, I would arrive at the conclusions I will shortly indicate.
Admittedly, the intervention in high school experimentation is a new field of undertaking for S.P.C.A. It asserts its rights in the field of scientific experiments; indeed it does not deny that the S.P.C.A. can intervene into the affairs of the innumerable research laboratories, whether private or corporate, that exist in the State and which are not authorized by the State Department of Health under N.J.S.A. 4:22-16(a). It does not deny that it has the right to intervene in activities of institutions of higher learning in this field, and, as I before indicated, a great many such institutions, including Rutgers, presently conduct living animal experiments in this State without authorization. Yet, as of now, S.P.C.A. seemingly takes the position that above the high school level these experiments on living animals, even though pain-inducing, are proper, since the supervision is allegedly better.
The present quarrel of S.P.C.A. is with high school experimentation of this type, but if the statute be interpreted in the tight fashion it has suggested, all of the research institutions not now authorized, as well as groups and individuals, including doctors, veterinarians and scientists experimenting with live animals in their laboratories, would need to have authorization from the State Department of Health. (The corporate entities would have to amend their charters to include the purposes designated in N.J.S.A. 4:22-16, and individuals, no matter how qualified, could not do their own work because they are not entities bearing charters "having among their corporate purposes investigation into the causes, nature, prevention and cure of diseases in men and animals." N.J.S.A. 4:22-16(a).
*89 I do not think that the Legislature ever intended such a result. On the contrary, I conclude that section 16 merely carves out a limited group, who, if their charter permits and certain steps are taken, and authorization is given, may remove themselves from investigation and prosecution by S.P.C.A. In other words, these limited groups can inflict even unnecessary pain or even needlessly mutilate or kill a living animal in the course of their work without being liable to prosecution from the S.P.C.A. "Agricultural stations" and, if "schools" be interpreted to be modified by "agricultural," then "agricultural schools," as well as the other enumerated organizations, are all of a particular kind in that they explore diseases in men and animals. It is logical, therefore, that the Legislature would give them special rights, if authorized by the State Department of Health. The Department is given supervision of this field and the right to revoke the privilege granted by section 16.
In my view, all entities other than those capable of obtaining authorization from the State Department of Health, and who have been authorized by said Department, may conduct living animal experiments, if they do not needlessly mutilate or kill or inflict unnecessary cruelty, etc.; in short, if they do not violate N.J.S.A. 4:22-26. Thus, my interpretation of the statute is that S.P.C.A. has no right to investigate and prosecute institutions authorized by the Department of Health, but may investigate all others in relation to their observance of the mandate of section 26 and to prosecute them if there be a violation. Surely, the Legislature would have used different language initially, or would have adopted different language over the years, if this interpretation be the incorrect one. It could readily have said in bold and simple language: "All experiments on living animals must be conducted under license of the Department of Health, which license the State Department may revoke for good cause." If the Legislature meant to exclude all living animal experimentation by section 16, why did it use in *90 section 26(a) and (c) the words "needlessly" and "unnecessary"?
I conclude, therefore, that because the school board has not obtained authorization from the State Department of Health an authorization which the Department does not think it needs the board is not thereby barred from performing living animal experimentation. And this, in my view, is true of all others who are conducting such experimentation in the State without authorization from the State Department of Health.[2]
I must next decide whether the experiment in question fell within the ban of N.J.S.A. 4:22-26 against needless mutilation or killing or the infliction of unnecessary cruelty.
To me, reading subsections (a) and (c) of section 26 in the light of all the other specific prohibitions of that section, namely (o) to (s), inclusive, I reach the conclusion that an experiment of the type here involved is not per se needless or unnecessary. All of the other subsections of 26 reveal the Legislature's awareness of the commonly accepted view that animals may properly be used by man. An animal can be driven, but not overdriven; can be loaded, but not overloaded; can be worked but not overworked. (See (o) to (s) for all the specific details of what, in the mind of the Legislature, oversteps proper bounds of human conduct.)[3]
*91 Cruelty, to my mind, is the unjustifiable infliction of pain, with the act having some malevolent or mischievous motive. There must be something willful or wanton about it. The following cases in New Jersey support this proposition: Roeber v. S.P.C.A., 47 N.J.L. 237 (Sup. Ct. 1885) (the cruel kicking or striking of a mule with the butt of a whip because it slipped and fell on the ice); N.J.S.P.C.A. v. Compton, 71 N.J.L. 86 (Sup. Ct. 1904) (cruelty to a dog); State v. Davis, 72 N.J.L. 345 (Sup. Ct. 1905), affirmed 73 N.J.L. 680 (E. & A. 1906) (using pigeons as targets to be shot at for amusement); State v. Harned, 72 N.J.L. 353 (Sup. Ct. 1905), affirmed 73 N.J.L. 681 (E. & A. 1906) (shooting pigeons as target); Rosen v. N.J.S.P.C.A., 82 N.J.L. 130 (Sup. Ct. 1911) (cruelly torturing and tormenting a horse and inflicting unnecessary cruelty by driving said horse hitched to a delivery wagon while the horse was suffering from a large gall sore upon the back); S.P.C.A. v. Whitney, 84 N.J.L. 136 (Sup. Ct. 1913) (shooting a dog in the street, wounding the animal); Bodine v. Cinkowski, 7 N.J. Misc. 1050 (Sup. Ct. 1929) (torturing and abusing dogs by keeping them in a sick and starving condition); State v. Spencer, 20 N.J. Misc. 487 (Sp. Stat. Trib. 1942) (cruelly abusing and needlessly killing an alley cat by beating it with a stick); State v. Richardson, 4 N.J. Super. 503 (App. Div. 1949) (cruelly abusing and needlessly torturing a chicken).
As referred to above, the specific prohibited acts contained in section 26 as well as the other sections in the statute indicate a common characteristic that is, the acts are wanton and cruel and have no redeeming qualities. It is well established that in the case of an ambiguity the words take color from associated words: noscitur a sociis. Martell v. Lane, 22 N.J. 110, 117 (1956); State v. DeLouisa, 89 N.J. Super. 596, 600 (Cty. Ct. 1965). Therefore, these characteristics of wantonness and cruelty and lack of any redeeming quality were probably intended to be included within the meaning of the broader prohibited act of unnecessary cruelty *92 and needless mutilation. Accordingly, educational and scientific achievements might well represent the redeeming quality that would constitute the justification for inflicting pain or suffering on animals to render the cruelty not unnecessary or the mutilation not needless.
I conclude that if there is a truly useful motive, a real and valid purpose, there can, under the statute, be acts done to animals which are ostensibly cruel or which ostensibly cause pain.[4]
The experiment here involved was in biology which, of course, is the study of life, and the purposes of the defendants in this and other experiments are as follows:
"1. To offer the student an opportunity to observe life processes which lead to a sympathetic respect for life.
2. To provide future citizens with some knowledge of the nature of science and of the techniques and principles of scientific inquiry.
3. To provide future citizens with some knowledge of the principles of health, disease, and medicine and of some aspects of agriculture.
4. To identify the talented student in this field.
5. To motivate selected students to become the medical and biological scientists of the future."
The experiment itself was conducted by Barry Fugere, at that time a 17-year-old sophomore in the East Orange High School. He was an outstanding student, very superior, as the high school principal testified. He was in the top seven of all East Orange students and two or three years above his age in ability. He ultimately graduated eighth out of 404. *93 Before his request to conduct the experiment was granted, his first-year biology teacher, Donald Robertshaw, gave Fugere extensive reading assignments which were followed by Fugere, and Robertshaw examined him carefully as to what he had read, checked carefully into his motives, and satisfied himself that Fugere was fully capable of conducting the experiment in all phases. Fugere was strongly motivated toward a career in medical research as a doctor and virologist, and at present is a pre-medical student at Drew University. Robertshaw, I conclude, is a fully qualified science teacher, well able to permit and supervise an experiment of this type. In addition to his work at East Orange High School, Robertshaw teaches science at Upsala College.
The experiment Fugere desired to conduct and did conduct involved the Rous sarcoma virus. Discovered many years ago, this preparation is known to produce cancerous tumors in chickens, particularly young chickens, and has been the subject of many experiments over the years. From a well respected nonprofit culture collection in Washington, Fugere asked for and obtained the virus and information on it, being sent a letter outlining the procedures in connection with the virus, and he generally followed this letter in the conduct of his experiment.
He bought four 6-8-week-old chickens, constructed two cages therefor and, because he was ill, did not inject them at 2-8 weeks, the suggested procedure, but waited until they were several weeks older. Fugere had had prior experience in injecting with a needle and therefore knew the technique. The chickens were injected with the virus on January 28, 1964. On February 10, 1964 two chickens first showed signs of developing a tumor, and on March 7, 1964 one chicken was bleeding from the tumor, which had enlarged considerably. On the advice of Robertshaw, Fugere put the chicken to death by ether. The second chicken developed a tumor which grew and spread, and this chicken died from the tumor on March 17, 1964. The other two chickens have never developed any signs of cancer.
*94 Fugere prepared slides of the matter from the tumors of the two dead chickens and studied their chest cavities and other parts of their remains. On all steps of the procedure, briefly outlined above, Robertshaw kept a close check. He had obtained permission for the whole experiment, not only from the head of his science department, but from the principal of the school, both of whom were generally aware of the progress of the experiment.
Fugere outlined in detail in his testimony the purposes that moved him to conduct the experiment and his motives in continuing it and in preparing his slides and examining them. He was particularly interested in the fact that two chickens resisted the virus and in the cause of such resistance. I am completely satisfied that his motives and those of his superiors in connection with the experiment were of the highest calibre and were purely scientific and educational in nature.
The two surviving chickens, together with details of the experiment, were, at the suggestion of another science teacher of East Orange High School, entered in the Newark Science Fair held April 6 and 7, 1964. There the matter came to the attention of Mr. Don R. Maxfield, New Jersey Executive Director of The American Humane Society, and ultimately these proceedings were instituted.
Much point was made by plaintiff of the fact that the experiment on the chickens was delayed until they were several weeks older than the suggested time of injection. The testimony satisfied me that this delay was valuable to the experiment rather than harmful.
The experiment obtained honorable mention in the Newark Science Fair and first place in a later Science Fair in East Orange. The articles Fugere read and the advance studies he made and all steps of the experiment are fully detailed in the evidence.
It is not in dispute in the case, and indeed from the evidence could not be disputed, that apart from the nature of the experiment itself, with which plaintiff quarrels, the chickens *95 were given proper care and feeding during the course of the experiment in the high school animal room, an area specially constructed for such purpose.
The issue remains as to whether the high purposes of the experiment took it out of the statutory prohibition against needless mutilation or killing or unnecessary cruelty. To this issue the greater part of the testimony in the case was directed.
On this vital point defendants produced many distinguished witnesses, including scientists, educators, writers or collaborators or directors of a new series, "Biological Sciences Curriculum Studies." This project, as developed in the testimony of its director, Dr. Arnold B. Grobman, was a result of Federal Government grants of some eight million dollars and involved long effort on the part of leaders in the field. In the books and pamphlets of this project for science teaching in the high schools of this country there are featured the advantages of living animal experiments to be conducted by students under appropriate supervision. Suffice it to say that this project has resulted in the production of books and pamphlets which are probably among the most widely used in the country in the teaching of high school science. The blue book in the series was copyrighted in 1963, and I gather the other books and pamphlets appeared around that time.
The testimony of Dr. Grobman, presently Dean of the College of Arts and Sciences at Rutgers, is illustrative of the views of virtually all of the other expert witnesses produced on the subject by defendants. He said that the use of living animals is essential at the high school level for biological studies in that it (1) helps students have sympathy for living things; (2) helps make them literate in the scientific field; (3) motivates other students to scientific careers; and (4) eliminates study by rote. Other witnesses detailed other good purposes.
According to Dr. Grobman and the other expert defense witnesses, the goal of present high school science teachers should be to encourage laboratory work with plants and with *96 animals, both dead and alive. Many of the experiments, according to these witnesses, use live chickens and other live animals. They agree that what Fugere did was necessary for his educational development.
As against this array of testimony, plaintiff produced an educator in the field, Robert M. Frey, Professor of Biology at Plymouth State College, University of New Hampshire, a doctor of education. Dr. Frey viewed Fugere's experiment as unnecessary and he emphatically stated he does not recommend animal experimentation at the high school level. He felt some students would be scared away from science by this type of work, and believed it should be postponed until the students are more mature. He felt such experiments have no educational value. He believed lecture demonstrations with models, films and slides would be the best possible method for high school students. He said that animal experimentation at his college is commenced in the junior year.
As to the use of models, films and slides, defendants' experts concede they have a place, but were of the opinion that these were far inferior to living animal experimentation under proper circumstances and under suitable supervision by qualified high school science teachers.
Testifying for plaintiff, James T. Mehorter, Professor of Psychology at Montclair State College, asserted that an experiment such as was here conducted, or any experiment upon living animals at the high school level, would have an adverse effect on the mental health of adolescents. He presented an impressive argument for this point of view. Nonetheless, he did not discuss any specific example of such an adverse result having occurred.
In opposition to Professor Mehorter's views, defendants presented Bertram D. Cohen, Professor of Psychology at the College, Graduate School and Medical School of Rutgers University. Dr. Cohen has a distinguished background, with many publications and much work in the field to his credit. In his view, no harm would come to a student who engages in such experimentation; on the contrary, he felt that *97 the student would be benefited. From his extensive work in clinics dealing with juveniles, Dr. Cohen said that a science experiment would not cause mental disturbances of the type envisioned by Professor Mehorter. I accept wholeheartedly Dr. Cohen's views.
S.P.C.A. contends that even if a properly conducted scientific experiment performed on live animals would not per se constitute a violation of the statute, the particular experiment involved here was improperly conducted. I am satisfied from the evidence that this experiment was in fact properly conducted, but even if there were mistakes, I am convinced by the evidence that they did not diminish the educational value of the experiment and may have actually added to the learning process.
I am further convinced from all the testimony that the type of experiment in this case, conducted as it was under the careful supervision of qualified people, did not constitute either an abuse or a needless mutilation or killing or unnecessary cruelty upon and of living animals or creatures. Thus, N.J.S.A. 4:22-26 was not violated.
Having reached this result, it becomes unnecessary to decide some of the other objections defendants interpose to an interpretation of the statute in accordance with the view of S.P.C.A. I therefore do not have to reach any determination as to whether such interpretation would result in discrimination against the board. Nor do I have to decide whether the authority which S.P.C.A. asserts is conferred upon the New Jersey Department of Health is an unconstitutional delegation of legislative power.
In the person of its first two witnesses, S.P.C.A. produced testimony indicating that the two well chickens exhibited at the Newark Science Fair were to some degree inadequately caged and were without water and food for 3 1/2 hours. Maybe the cage used at the Newark Science Fair, which was smaller than the one used during the experiment, could have been a little larger, because in it the chickens had to stoop a bit. Yet, for the short period of their confinement *98 I find the cage to have been entirely satisfactory. As to the lack of food and water for 3 1/2 hours, Barry Fugere outlined in detail what he himself had done and what preparation he had made. He fed and watered the chickens on two occasions on their first day there, and again at 6 P.M. on the second and last day. He had anticipated being at the Fair at 4 or 4:30 P.M. on the second day, but was delayed in transit by an automobile accident. Moreover, he had made arrangements with an attendant there to supply them with food and water if he should be absent, but the attendant apparently failed to act for a short period.
Under these circumstances I hold that the board of education did not violate N.J.S.A. 4:22-26 in connection with the exhibit at the Newark Science Fair, even if the chickens suffered unduly. However, I find they did not suffer unduly and that whatever discomfort they had was of a transitory, temporary nature and was not cruelty or anything else prohibited by the statute.
S.P.C.A. further argue that the particular virus could be of some danger to human beings. From the evidence on this score, I find this particular strain of Rous sarcoma virus apparently presented no danger to humans, although certain present strains of the virus might, according to the "Potential Biohazards in Cancer Research," conceivably present such danger. Future experiments with cancer virus might well be conducted with this thought in mind, so that adequate precautions can, if deemed necessary, be taken for the human beings involved.
In the course of the trial I stated that the injection of the chickens did not, in my opinion, cause pain of any significance in so far as the statute is concerned. If any pain there was at the time of the injections, it was de minimis. I adhere to such ruling.
It is argued by S.P.C.A. that the court is a poor place to determine the justification of inflicting pain on animals. While there seems to be some merit to this point, the courts make similar determinations with respect to victims who happen *99 to be people. S.P.C.A. does not argue that the courts do not have the exclusive original jurisdiction over acts of cruelty occurring outside of scientific experiments.
S.P.C.A. further argues that the court would act after the harm had been inflicted. This is just as regrettable as the situation where the court in a murder trial acts after the harm has been done. There is hope that penal laws have some deterrent effect, and this effect presumably occurs before each violation.
S.P.C.A. also argues that the result, if defendant board is successful, would be that the science teacher would determine when the experiment was justified, balancing his evaluation of the pain and cruelty against the educational value to be derived. This, indeed, would place a heavy responsibility in the hands of the teacher, but then again, the minds of our children are also placed in his hands.
For the reasons expressed there will be judgment entered for defendants.
NOTES
[*] Vineland State School, Jersey City State College, Monmouth Medical Center, St. Elizabeth's Hospital, Wallace Research Institute, Cyanamid Foundation for Agricultural Development, United Hospital of Newark, Hackensack Hospital, Campbell Soup Co. Research Institution, Middlesex General Hospital, Passaic General Hospital, Warner-Lambert Research Institute, Ethicon Research Foundation, St. Francis Hospital, West Jersey Hospital, Orange Memorial Hospital, Newark Beth Israel Hospital, Newark Medical Center, St. Barnabas Hospital, State Seton Hall Medical School, St. Francis Hospital, Merck Institute, Rutgers University (pending authorization), Ortho Research, Deborah Hospital and St. Vincents' Hospital.
[1] It is to be noted how close this experiment comes to the one here involved, the essential difference being the use of mice in one and of chickens in the other.
[2] While the entities enumerated in N.J.S.A. 4:22-16 include "agricultural stations" and "schools maintained by the state or federal government," it becomes unnecessary to determine definitively whether a high school was intended to be there included. An entity capable of receiving authorization but which has not received such authorization would in my view be in the identical situation as an organization not capable of receiving authorization under section 16(a). It is undisputed that the board received no authorization from the State Department of Health.
[3] This accepted principle of mankind has been expressed in the Bible, Book of Genesis, chapter 1, verse 26, (Authorized King James Version):
"And God said, `Let us make man in our image, after our likeness: and let them have dominion over the fish of the sea, and over the fowl of the air, and over the cattle, and over all the earth, and over every creeping thing that creepeth upon the earth.'"
[4] Most of the witnesses in the case professed themselves as unable to say the two chickens which developed cancer were in pain as a result of their tumor. Evidently no one has yet been able either to determine scientifically the existence of or the measurement of pain in chickens or animals of this type. Yet, for the purpose of this case, I am satisfied the chickens certainly suffered some discomfort and probably some pain. At any rate, our Legislature, by the very enactment of this statute, would have seemed to have considered the subject and placed prohibitions on needless or unnecessary discomfort or pain, or whatever the feeling of the chickens may be termed. In any event, there was in this case some mutilation and killing, mentioned in section 26.
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50 B.R. 565 (1985)
In re LOOP HOSPITAL PARTNERSHIP, an Illinois Limited Partnership, Debtor.
Bankruptcy No. 83 B 4169.
United States Bankruptcy Court, N.D. Illinois, E.D.
June 18, 1985.
*566 Frank O. Wetmore, II, Rosalind B. Hebert, Winston & Strawn, Chicago, Ill., for Mid-City Bank.
J. Barton Kalish, J. Barton Kalish & Associates, Larry M. Wolfson, Jenner & Block, Richard J. Cremieux, Joyce & Kubasiak, Chicago, Ill., for Loop Hosp.
John M. Babbington, Jaros, Tittle & O'Toole, Chicago, Ill., for Talman Home.
Ben D. Schwartz, Altheimer & Gray, Chicago, Ill., for Hugh Michaels.
Richard H. Ferri, Continental Bank, Law Dept., Chicago, Ill., for Continental Bank.
John Collen, Nachman, Munitz & Sweig, Chicago, Ill., for Pioneer Bank.
MEMORANDUM AND ORDER
ROBERT L. EISEN, Bankruptcy Judge.
Presently before the court are motions for the determination of priorities, pursuant to which the parties have submitted a certain issue for ruling, and various petitions for attorneys' fees submitted by counsel for the debtor-debtor-in-possession ("Loop").
*567 The first question for determination is whether Joyce and Kubasiak ("J & K"), attorneys for the debtor and an asserted secured creditor herein are entitled by virtue of an assignment of the beneficial interest in a certain land trust to priority over certain other creditors who claim prior assignments of the beneficial interest in the same land trust. In the court's view, the resolution of that question requires it to decide two issues. The first is whether under applicable Illinois law, for purposes of determining priority among creditors, an assignment of beneficial interest is perfected upon execution of the agreement between the parties or upon lodging that assignment with the trustee.
The second issue is whether upon equitable principles J & K's claim is entitled to priority even if their security interest was perfected first under Illinois law.
FACTS
There is no dispute as to the relevant facts. As disclosed by the pleadings, memoranda and exhibits, "Loop" sold its principal asset with court approval on or about August 21, 1984 with liens to attach to proceeds of that sale. Several entities claim liens by virtue of assignments of the beneficial interest in the land trust under which the property was held. In 1982 a group of banks composed of Continental, Mid-City and Pioneer ("the Banks") undertook extensive negotiations with Loop to forebear from prosecuting foreclosure proceedings on the property. From the exhibits on file, it appears that that process was underway at least in May of 1982. The agreements under which the Banks assert their assignments of the beneficial interest were accepted by Loop's representative on July 14, 1982. The Banks lodged their assignments with the trustee on July 15, 1982. J & K has tendered an assignment of beneficial interest executed on July 13, 1982. That document was placed with the trustee on November 15, 1982.
The agreement between Loop and the Banks provides in relevant part:
1. The Borrowers and Guarantors jointly and severally affirm, acknowledge, and admit to and for the benefit of the Banks as follows:
E. Loop Hospital Partnership owns 100% of the beneficial interest ("collateral") under the land trust. The collateral assignment of 100% of the beneficial interest in the Land Trust executed contemporaneously herewith and attached hereto as Exhibit A(2) (the "Security Agreement") has been duly executed and delivered and is intended to grant the Banks a good, valid and enforceable security interest or other encumbrance in such collateral subject only to a prior assignment of 100% of the Beneficial interest in the land to Talman Federal Savings and Loan Association, and said assignment is hereby ratified and affirmed.
F. There are no defenses, claims or setoffs existing which would impair or prevent the immediate collection from the Borrowers or Guarantors of the indebtedness evidence by the Notes referred to in subparagraph A hereof, . . . which would impair or prevent the Banks' immediate recourse against the collateral described in sub-paragraph E hereof pursuant to its security interest; to the extent that any such defenses, claims and/or setoffs exist, whether known by the Borrowers of the Guarantors or unknown, they are hereby waived.
G. Neither the Borrowers nor the Guarantors are aware of any facts which with the passage of time or the giving of notice, or both, would ripen into a defense, claim or setoff described in subparagraph F hereof.
The Borrowers and Guarantors jointly and severally intend to be bound by the foregoing affirmations, acknowledgments, admissions and waivers and agree and consent to the admission of any or all of such affirmations, acknowledgments, admissions and waivers in any judicial proceedings.
J & K has argued that their claim is prior to the Banks' because its assignment was *568 executed one day prior to the Banks'. The Banks have contended that priority among assignments of beneficial interest should not be governed by the Uniform Commercial Code because such an assignment is not a "security interest" and that the date of lodging the assignment with the land trustee should be the relevant date for the purpose of determining priorities. The Banks further assert that the documents represent that there were no prior assignments and that J & K, as attorneys for Loop during the course of the negotiations, were well aware that the documents contained this representation when they executed their assignment one day prior on July 13, 1982. J & K has argued that there is no factual support for the allegation that there was a misrepresentation and furthermore, that J & K should not be held responsible for any representations by Loop.
DISCUSSION
I. PRIORITIES.
Under the governing Illinois law of land trusts, an assignment of the beneficial interest in a land trust is personal, not real property. E.g., People v. Chicago Title & Trust Co., 75 Ill. 2d 479, 27 Ill. Dec. 476, 389 N.E.2d 540 (1979); Levine v. Pascal, 94 Ill.App.2d 43, 50, 236 N.E.2d 425, 428 (1968). It appears well-settled in Illinois that priority questions involving the beneficial interest in land trusts are governed by the Illinois Commercial Code (UCC). Ill. Ann.Stat. ch. 26, § 9-302 Illinois Code Comment at 154-55 (Smith-Hurd 1982); First Federal Sav. & Loan Ass'n v. Pogue, 72 Ill. App. 3d 54, 27 Ill. Dec. 588, 591, 389 N.E.2d 652, 655 (1979).
Two sections of the Illinois Commercial Code are relevant to the present case. The first of those sets out those instances where filing is required to perfect a security interest and provides in relevant part:
(1) A financing statement must be filed to perfect all security interests except the following:
(c) a security interest created by an assignment of a beneficial interest in a trust or a decedent's estate;
Ill.Ann.Stat. ch. 26, § 9-302 (Smith-Hurd 1982). Prior to 1972, filing had been required. The Illinois Code Comment provides:
This paragraph changes the rule followed in Levine v. Pascal, 94 Ill.App.2d 43, 236 N.E.2d 425 (1st Dist.), petition for leave to appeal denied 39 Ill. 2d 626 (1968), decided under the pre-1972 text, in which a beneficial interest in an Illinois land trust was held to be a general intangible which could be perfected only by filing. Filing is no longer necessary to perfect a security interest in a beneficial interest in a trust or a decedent's estate.
Ill.Ann.Stat. ch. 26, § 9-302 Illinois Code Comment at 154-55 (Smith-Hurd 1982). This comment indicates, as does Illinois case law, that although filing is no longer required, perfection of an assignment of beneficial interest is nevertheless governed by the Code. In re Cowsert, 14 B.R. 335, 339 (Bankr.S.D.Fla.1981); First Federal Sav. & Loan Ass'n. v. Pogue, 72 Ill.App.3d 54, 27 Ill. Dec. 588, 592, 389 N.E.2d 652, 656 (1979).
Section 9-303 of the Code recites when a security interest is perfected and provides in pertinent part:
(1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in Sections 9-302, 9-304, 9-305, and 9-306. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches.
Ill.Ann.Stat. ch. 26, § 9-303 (Smith-Hurd 1982).
In turn, a security interest attaches pursuant to section 9-203(2) when:
(a) The collateral is in possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral . . ., and
(b) value has been given; and
(c) the debtor has rights in the collateral.
*569 Ill.Ann.Stat. ch. 26, § 9-203(2) (Smith-Hurd 1982).
Thus, in the instant case, it appears that since Illinois legislative history and case law determine that perfection of an assignment of the beneficial interest in a land trust is governed by the Illinois Commercial Code, such a security interest is apparently perfected even without provision of notice to third parties. Although this court is somewhat persuaded that perfection should require lodging with the trustee in order to give notice to creditors, it is not prepared to fly in the face of the weight of authority in Illinois on the subject. However, the equities in the present matter do not require the court to do so.
The court notes that section 1-203 of the U.C.C. contemplates that in performance or enforcement of "every contract or duty within this Act [is imposed] an obligation of good faith." Ill.Ann.Stat. ch. 26, § 1-203 (Smith-Hurd). In order to enforce priorities under the Illinois Commercial Code, the court must be satisfied that the party seeking the benefit of the Code's priority scheme behaved in good faith.
A review of the record indicates that the good faith requirement of the U.C.C. and principles of equity mandate that the secured claim of Joyce and Kubasiak be subordinated to all other secured claims in this matter.
Equitable Subordination
Section 510(c) of the Bankruptcy Code governs the power of the court to subordinate claims and provides in pertinent part:
Notwithstanding subsections (a) and (b) of this section, after notice and a hearing, the court may
(1) under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another claim . . ., or
(2) order that any lien securing such a subordinated claim be transferred to the estate.
Ill. U.S.C. § 510(c)(West 1984).
The Supreme Court, in Pepper v. Litton, 308 U.S. 295, 60 S. Ct. 238, 84 L. Ed. 281 (1939) articulated the premise that the "bankruptcy court has the power to shift the circumstances surrounding any claim to see that injustice or unfairness is not done to the administration of the bankruptcy estate." The Fifth Circuit has set forth three conditions which must be present before a claim will be subordinated. matter of Mobile Steel Co., 563 F.2d 692, 699-700 (1977). Legislative history to the Bankruptcy Code indicates that case law principles existing at the time the Code was enacted are still applicable. Sen. Rep. No. 95-989, 95th Cong., 2d Sess. 74 (1978), U.S. Code Cong. & Admin.News 1978, p. 5787. Thus the criteria set forth in Mobile Steel are presently applicable. Those criteria are:
1. The claimant must have engeged in inequitable conduct;
2. The misconduct must have resulted in injury to the creditors of the bankrupt or conferred an unfair advantage on the claimant.
3. Equitable subordination of the claim must not be inconsistent with the provisions of the Bankruptcy Act.
Mobile Steel, 563 F.2d at 700. See also In re Wilnor Drilling, Inc., 29 B.R. 727, 730 (S.D.Ill.1983). Although the doctrine of equitable subordination is most frequently applied in situations involving misconduct of corporate officers or directors, it can also be used in other appropriate situations. E.g., Matter of Pat Freeman, Inc., 42 B.R. 224, 231 (Bankr.S.D.Ohio 1984). In the present case, J & K represented Loop during negotiations with the Banks, participated in the preparation and drafting of the agreement and knew when they received their assignment on the 13th that on the following day, July 14, their client would be representing that there were no prior assignments of beneficial interest in the land trust. Taking the assignment after having represented Loop in the negotiations with knowledge of the representations contained in the agreement was inequitable conduct at best.
*570 Second, the Banks' position was obviously harmed by J & K taking the assignment. Additionally, the knowledge which J & K gained as Loop's attorneys certainly gave them an unfair advantage over other creditors. Armed with that knowledge, they were able to obtain a prior collateral assignment of beneficial interest.
Finally, subordinating J & K's secured claim is in no way inconsistent with the provisions of the Bankruptcy Code. The Supreme Court has passed upon the court's power to distribute the estate in accordance with equitable principles notwithstanding the priority scheme set forth in the Code. Pepper v. Litton, 308 U.S. at 304-05, 60 S.Ct. at 244.
Although this is a classic case for equitably subordinating the claim of Joyce and Kubasiak, alternatively, they are estopped under principles of equity from asserting that their assignment was prior in time to the Banks'.
Estoppel
Estoppel, as set forth by the Seventh Circuit: "arises . . . when one has so acted as to mislead another and the one thus misled has relied upon the action of the inducing party to his prejudice." Citation Cycle Co., Inc. v. Yorke, 693 F.2d 691, 695 (7th Cir.1982) citing Lebold v. Inland Steel Co., 125 F.2d 369, 375 (7th Cir.1941), cert. denied, 316 U.S. 675, 62 S. Ct. 1045, 86 L. Ed. 1749. This standard has been further detailed as incorporating six elements which are:
(1) words or conduct by the party against whom estoppel is alleged constituting either a misrepresentation or concealment of material facts; (2) knowledge on the part of the party against whom the estoppel is alleged that representations made were untrue; (3) the party claiming the benefit of the estoppel must have not known the representations to be false either at the time they were made or at the time they were acted upon; (4) the party estopped must either intend or expect that his conduct or representations will be acted upon by the party asserting the estoppel; (5) the party seeking the benefit of the estoppel must have relied or acted upon the representations; and (6) the party claiming the benefit of the estoppel must be in a position of prejudice if the party against whom the estoppel is alleged is permitted to deny the truth of the representations made.
In re Maxwell, 40 B.R. 231, 239 (D.C.N.D. Ill.1984) citing Stewart v. O'Bryan, 50 Ill. App. 3d 108, 8 Ill. Dec. 633, 365 N.E.2d 1019 (1977).
In the present case, the agreement contained the representation that there were no prior assignments as of July 14, 1982. Joyce and Kubasiak represented Loop in the negotiation, drafting and execution of that agreement. In equity, the situation is equivalent to one in which the law firm itself had made the representation. Having drafted the representation on behalf of their client, it ill behooves J & K to deny that it was not also their own. Since the firm had itself taken an assignment just one day before, it obviously knew that the July 14 representation that there were no prior assignments of beneficial interest was untrue; and since the assignment to Joyce and Kubasiak was nowhere a matter of record on July 14, the Banks would not have known of it. Hence, the Banks would have had no way of knowing that the statement in the agreement was false. The intent in representing that there were no prior assignments could have been none other than to induce the Banks' reliance thereon to enter into the agreement. The Banks relied upon the representation in executing the agreement. Finally, the Banks' position would be prejudiced if Joyce and Kubasiak were allowed to utilize their knowledge of the ongoing negotiations between their client and the Banks and the schedule for executing the agreement to "sneak through the back door" and take an assignment of beneficial interest to secure their lien for attorneys' fees just one day prior to execution of the agreement with the Banks.
Therefore, even though the J & K's lien was perfected prior to the Banks' lien, they *571 will not stand prior to the Banks in this Bankruptcy case. The claim of Joyce and Kubasiak is equitably subordinated to those of the Banks as contemplated by section 510(c)(1) of the Bankruptcy Code. The lien securing the claim so subordinated is transferred to the estate in accordance with section 510(c)(2) of the Code.
II. FEE PETITIONS
Also before the court are fee petitions submitted by the law firms of Jenner & Block and J. Barton Kalish and Joyce and Kubasiak all on behalf of the debtor and debtor-in-possession. Pioneer Bank and Mid-City Bank have objected to fees being awarded from the proceeds of the sale.
A. Fee Petition of Jenner & Block and J. Barton Kalish.
Before the court are petitions in which Jenner & Block and J. Barton Kalish request some $108,000 in fees of which $75,754 remains outstanding. The petitioning attorneys highlight the sale of Loop's principal asset at a price which will allow recovery for the objecting banks and the relatively quick resolution of the case as justifications for amounts sought. Mid-City has objected on the grounds that the attorneys are not proper parties to petition for fees under section 506(c), that time spent administering the Chapter 11 proceeding did not benefit the secured creditor under section 506(c), that certain services are duplicative and hence not compensable, and that J. Barton Kalish should be disqualified from the point at which he testified in the case. Section 506(c) of the Bankruptcy Code provides:
The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.
11 U.S.C. § 506(c) (1984).
As set forth in In re Trim-X, 695 F.2d 296, 299 (7th Cir.1982), in order to be recoverable under section 506(c) expenses must be reasonable, necessary and of benefit to the secured party. Attorneys' fees for general representation of a debtor may be charged to a secured creditor to the extent which they benefited the secured creditor. In re Sonoma V, 24 B.R. 600, 604 (Bankr. App.Pan. 9th Cir.1982).
First, the court chooses not to adopt the minority viewpoint expressed in cases such as In re Manchester Hides, Inc., 11 Bankr. Ct.Dec. 969, 972, 32 B.R. 629 (N.D.Va.1983) and In re Codesco, Inc., 18 Bankr. 225 (Bankr.S.D.N.Y.1982) which indicates that attorneys may not petition for fees under section 506(c). The usual practice is the opposite, even as indicated in cases such as Sonoma V. See, also 3 L.King, Collier on Bankruptcy ¶ 506.06 at 51, n. 7a (15th ed. 1985). This court also notes, as did the Manchester Hides court that the court has ample equitable powers to award fees in a situation such as the present one.[*] Therefore, any awards herein are alternatively grounded upon those equitable powers. 11 B.C.D. at 972-73, 32 B.R. 629.
The Banks have also argued that all fees for debtors' counsel which are "administrative" are not directly related to preservation and disposition of the Banks' collateral and therefore, are not compensable. *572 As the Sonoma V court correctly noted, attorneys' fees for the administration of a case are chargeable to the secured creditor to the extent the creditor benefited from the activities. It is important to note that had this matter proceeded as a foreclosure, only the first mortgage-holder may have recovered.
In the present case, virtually all legal services, including those administrative legal services, furthered the end result of the very sale which produced a return to the Banks. Therefore, the court rejects the notion that debtor's counsel is not entitled to compensation for administering this Chapter 11 case. To deny compensation in such situations would chill the filing of liquidating Chapter 11 plans which can confer substantial benefits upon creditors. This court views thediligent prosecution of a Chapter 11 by competent counsel as benefitting the secured creditor, and will award Jenner & Block and J. Barton Kalish reasonable compensation for so doing.
Additionally, the court declines to deny further compensation to J. Barton Kalish from the point in time at which he testified in this case. That testimony was for the very narrow purpose of establishing efforts expended in advertising the asset for sale. No party would be prejudiced by his continued representation of the debtor and the court will not disqualify him on that ground.
The court will, however, deny compensation for services which were duplicative. The Banks have pointed out duplicative services in the amount of $15,535.95. In a situation where fees will come from the collateral of the secured creditors, it is especially important for counsel to avoid duplication. Compensation will be denied for services revealed by the time sheets to be duplicative. Therefore after applying the $35,000 retainer already paid, the court hereby awards the firm of Jenner & Block and J. Barton Kalish the additional sum of $57,218.67 and they are authorized to recover that amount from the proceeds of sale of the debtor's real estate.
B. Fee Petition of Joyce and Kubasiak
The law firm of Joyce and Kubasiak ("J & K") has requested compensation in the amount of $28,927.56. The Banks have objected to the awarding of any fees to J & K on the grounds that a nunc pro tunc order appointing J & K is inappropriate in this case, that J & K is not "disinterested" as required by the Code, that in equity, when determining their position regarding the sale, they had made judgments of whom to support premised upon claims at the time. Thus, it is argued, for the court to upset that balance would be inequitable. The docket sheet reflects that J & K was appointed special counsel by order of this court on June 14, 1983.
The law firm was retained because of its knowledge of the relationships between the partners and its knowledge of claims of third parties. Therefore, any arguments regarding nunc pro tunc appointments are moot. However, the order provided that all compensation would be subject to order of this court. Therefore, each objection to the award of compensation must be considered in turn.
The Banks' first objection is that J & K is not "disinterested" as required by section 101(13) of the Code and that, therefore, compensation should be denied.
The court is well aware of its authority and discretion to deny attorneys' fees to J & K in this situation. See e.g., In re B.E.T. Genetics, Inc., 35 B.R. 269, 271 (Bankr.E. D.Cal.1983). The court notes that when J & K was retained, their interests were set forth as a matter of record in accordance with Rule 2014(a) and no party objected at that time to the firm's retention. However, the interests which are a matter of record mandate that the court carefully scrutinize the fee petition and grant compensation only for matters which the court can determine are consonant with the purposes for which the firm was authorized to represent the debtor. The petition requested that they be retained in matters dealing with claims of third parties and which required *573 knowledge of the relationship between the partners. The time sheets reflect the following time which was clearly spent in those authorized activities:
Hrs. Rate Amount
J A W 11.25 50.00 $ 562.50
R J C 9.5 125.00 $1,187.50
PO 54.75 72.00 $4,106.25
GAT 5.25 472.50
_________
$6,328.75
Telephone conversations for which the court cannot discern the purpose are not compensable as are office conferences bearing the same general notation. Entries simply captioned "Bankruptcy Research" will not be compensated. Moreover, because of the circumstances of the case and the potential for conflicts of interest, the court declines to award compensation for services which are not clearly within the purpose for which the court authorized retention. Therefore, the court will order that Joyce and Kubasiak be awarded the sum of $6,328.75 as reasonable and necessary attorneys fees and $165.06 as expenses.
NOTES
[*] Relevant equitable factors noted were:
(1) Was there a reasonable expectation of consummating a reorganization plan which would have benefited secured creditors, thus justifying the imposition of charges against them which could not have been imposed in general bankruptcy proceedings? (2) Were the services rendered by those who have been awarded allowances intended primarily to protect the interests of unsecured creditors and the debtor, or was due regard also had for the interests of secured creditors? (3) Did those who have been awarded allowances demonstrate reasonable diligence and competence in bringing the unsuccessful reorganization proceedings to conclusion? (4) Were the secured creditors benefited by anything which was done in the reorganization proceedings? (5) Did the secured creditors request or consent to the bringing of the proceedings, or consent to, or waive objection to, any of the activities of the trustee therein? (6) Were the secured creditors responsible for any delays in connection with the proceedings, or uncooperative in this attempt to formulate an acceptable plan? Id.
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306 S.W.2d 564 (1957)
James B. HARGIS, Respondent,
v.
Mrs. E. A. SAMPLE, Appellant.
No. 46009.
Supreme Court of Missouri. Division No. 1.
November 12, 1957.
*566 Robert I. Meagher, Fredericktown, Dearing, Richeson & Weier, Will B. Dearing, Hillsboro, for appellant.
Thomas A. Mathews, Robert & Roberts, J. Richard Roberts, Farmington, for respondent.
COIL, Commissioner.
James B. Hargis, plaintiff below, was lessee, and defendant, Mrs. E. A. Sample, owner-lessor of the 40-room St. Francois Hotel and Coffee Shop in Farmington, Missouri. Plaintiff brought this action to recover damages consisting of loss of profits allegedly accrued by reason of the alleged breach by lessor of a covenant in the written lease of December 1, 1945, to make outside repairs. Defendant's counterclaim sought damages by reason of money and labor expended to repair alleged damage to the hotel allegedly inflicted by lessee. The jury awarded plaintiff $8,500 on his claim and found for him on defendant's counterclaim. Defendant has appealed from the ensuing judgment but here complains only of the judgment entered on plaintiff's verdict on his claim and contends that the trial court erred in failing to direct a defendant's verdict, in giving instructions, and in the admission of evidence.
Defendant first contends that the language of the lease relieves her of liability for any damage to plaintiff's property caused by water and that inasmuch as the evidence shows that any damages plaintiff sustained resulted from water damage to plaintiff's property, defendant was not liable.
The lease, a printed form of commercial lease, provided, in so far as instantly pertinent, these things: Under the heading contained in the margin of the lease "Repairs and Alterations": "All repairs and alterations deemed necessary by Lessee shall be made by said Lessee at Lessee's cost and expense with the consent of Lessor; * *."
Under the marginal heading "Damage to Tenants' Property": "Lessor shall not be liable to said Lessee or any other person or corporation, including employees, for any damage to their person or property caused by water, rain, snow, frost, fire, storm and accidents, or by breakage, stoppage or leakage of water, gas, heating and sewer pipes or plumbing, upon, about or adjacent to said premises."
Typed in a blank space provided for the insertion of any additions to the printed matter the parties might have wished was: "The lessor is to take care of all outside repairs including screens."
As we understand, defendant says the foregoing lease provision should be construed to mean that lessee was to make all repairs he deemed necessary except outside repairs which were to be made by lessor, but that in no event was there to be any liability on lessor for damage to the tenant's property caused by water, and that such a construction of the terms of instant lease is compelled by our holding in Gralnick v. Magid, 292 Mo. 391, 238 S.W. 132, 133, 28 A.L.R. 1530. We agree that Gralnick does require that construction but, *567 even so, for the reasons hereinafter, we cannot agree that instant defendant was relieved of liability.
The material parts of the lease in Gralnick were to all intents and purposes the same as the material parts of the instant lease. The lease there provided: "Said lessor shall not be liable to said lessee or agents, guests, or employees for any damage caused to his or their person or property by water, rain, snow, ice, sleet, fire, storms, and accidents, or by breakage, stoppage, or leakage of water, gas, heating, and sewer pipes, or plumbing upon, about, or adjacent to said premises. * * *
"Lessor agrees to do repairing."
The facts in Gralnick were that a fire damaged the roof of the leased building. During the course of lessor's negotiations with an insurance company and during the process of installing a new roof, plaintiff's stock of shoes was damaged by rain. This court, in holding that there was no liability on lessor, said that even if the words in that lease ("Lessor agrees to do repairing") were construed to mean "that she was to replace the roof or other parts of the building when destroyed by fire, yet we are unable to see in what possible manner that would benefit the lessee in this case, or render the lessor liable, when both parties clearly agree, by the language found in paragraph 1, that the lessor should not be liable to the lessee because of any damages done to him or his property on account of rain, water, etc." 238 S.W. 135 [4]. In other words, "although the lessor has covenanted to make repairs, he will not be liable for damages arising from a cause concerning which he is, by the terms of the lease, exempt from liability." 52 C.J.S. Landlord and Tenant § 423c(3), p. 83 (wherein the author so construed the holding of this court in Gralnick v. Magid, supra). And lease covenants relieving lessor from liability for damages resulting from stated conditions are valid. Govero v. Standard Oil Co., 8 Cir., 192 F.2d 962; Kansas City Stock Yards Co. v. A. Reich & Sons, Mo., 250 S.W.2d 692.
And so, in the instant case, if plaintiff's loss of profits accrued because of water damage to the "tenant's or lessee's property," as the term "property" was used in the instant lease, then, under our ruling in Gralnick v. Magid, supra, defendant-lessor was not liable to plaintiff-lessee for the only damages proved in the instant case.
It is defendant's view that the word "property" as used in the lease is all-inclusive and encompasses "every species of valuable right and interest, including real and personal property, easements, franchises, and other incorporeal hereditaments," Lawrence v. Hennessy, 165 Mo. 659, 670, 65 S.W. 717, 719, and that a leasehold interest is personal property, Thacker v. Flottmann, Mo., 244 S.W.2d 1020, 1023. Thus, says defendant, lessee's property was damaged by water in that his leasehold was damaged by reason of his inability to rent certain rooms which resulted from water damage to those rooms. In one sense, a benefit which lessee obtained by reason of the lease and which technically was property was the right to use the rooms in the hotel. And thus, when the right to use the rooms in question was destroyed by reason of water entering those hotel rooms through a leaky roof, and perhaps through leaky windows or walls, lessee's property was damaged. And it is further true that a lease is for certain purposes "regarded as equivalent to a sale of the premises for the term * * *." Warner v. Fry, 360 Mo. 496, 499, 228 S.W.2d 729, 730 [1]; and see, State ex rel. St. Louis County v. Evans, 346 Mo. 209, 216, 139 S.W.2d 967, 969 [5]. And "such estate has been said to be property or a valuable property interest." 51 C.J.S. Landlord and Tenant § 26, p. 531. Thus, again, in one sense, damage to the room, as opposed to damage to its contents, was damage to lessee's property.
We have the view, however, that the parties to this lease, when they referred to "lessee's property" under the marginal heading "Tenants' Property," intended to and did use the word "property" to describe that personal property which the tenant or *568 lessee would be entitled to remove from the premises upon the termination of the lease. To illustrate our view, if plaintiff in this case sought to recover by reason of water damage to his furniture located in particular hotel rooms, he would be precluded by the terms of this lease because lessor had been relieved of liability for water damage to lessee's property. In the instant case, however, all of the evidence as to the damage to the rooms which resulted in alleged loss of profits was water damage to the walls, the paper, and the plaster, which, in most instances, made the rooms in question untenantable because they thereby became too moldy and smelly and damp to be rentable. The water damage was to the rooms which were owned by lessor, even though leased to plaintiff. Lessee's personal property contained in the rooms was not damaged.
Words used in a written lease are to be interpreted according to their ordinary meaning unless they are defined in the instrument itself. Missouri Athletic Association v. Delk Investment Corp., 323 Mo. 765, 771, 20 S.W.2d 51, 54 [2, 3]. We have the view that lessor and lessee in the instant case, when they spoke of water damage to lessee's property, referred to tangible chattels which are ordinarily thought of as one's property located in a rented building. That such was likely, it seems to us, is indicated by the fact that the entire clause quoted above which relieved lessor from water damage to lessee's property included damage to the property of employees or guests. Property of employees and guests would, of course, be the items of tangible personal property that those persons, i. e., lessee's employees and guests, might have within the rented structure. And if so, then the word property indicating "lessee's property" could have no different connotation.
We are of the view, therefore, that the lease did not relieve defendant of liability for the damage which the evidence in this case tended to show.
Defendant, as a second reason for urging that the trial court erred in failing to direct a defendant's verdict, asserts that the plaintiff adduced no sufficiently definite evidence of monetary loss sustained, but, on the contrary, the evidence was such that any finding as to an amount of loss was entirely speculative and conjectural. A search of the record discloses that the sole evidence which pertained to the extent of any damage suffered pertained to alleged loss of profits which allegedly resulted from the untenantability of certain hotel rooms which was caused by defendant's failure to accomplish outside repairs, to wit: repairs to the roof, to downspouts, and perhaps to window sills and side walls. Plaintiff testified that while he could not give an exact number of rooms which were untenantable due to dampness, odor, and moldiness for each year of the lease, he could nevertheless approximate that number. Plaintiff said an estimated number of rooms at stated prices were not rentable for various estimated percentages of the total lease period, and testified that during the first five years of the lease he turned away sufficient people every night to have filled the rooms had they been tenantable and that in the last five years of the lease he turned away, on Monday, Tuesday, Wednesday, and Thursday nights, an average of seven or eight people to whom he could have rented rooms had it not been for the untenantable condition of the rooms. He further testified that if the untenantable rooms had been available for renting, his only cost over and above the cost of operating the hotel with the rooms unavailable, would have been the cost of supplying linens, electricity, soap, and water, which would have been 30¢ per room per night.
We think the foregoing testimony was sufficiently definite to support the award of damages in this case unless other testimony by plaintiff to which we shall refer destroyed its sufficiency. Plaintiff said that his hotel clerk kept the books and therefrom *569 had made a memorandum of the number of rooms which from time to time were not rentable. It appeared that plaintiff had some sort of memorandum at the time he testified, but the memorandum plaintiff had was not the one prepared by the clerk and, so far as the record shows, the clerk's memorandum was never identified or used and its absence was not accounted for. But it is not clear whether plaintiff meant that he was basing his estimates of the percentages of time the rooms were available on his examination of the memorandum his clerk had made from the records and thence transposed to the memorandum he had, or whether he was relying wholly on his recollection even though records were available. Furthermore, plaintiff's testimony as to the number of people turned away is not entirely clear as to whether plaintiff's estimate was based entirely on recollection or whether, again, the clerk had kept some record thereof to which he had recently referred. Plaintiff did say that he had kept records of the operation over the entire 10-year period and yet did not purport to produce or testify from any of those records. It also appeared that plaintiff kept registration sheets for hotel guests and later a registration card system was used. Plaintiff said that there was a requirement that the cards be retained for the last three years and that when he left at the end of his lease, the registration cards for the last three years were left in a storage room at the hotel. The cards were not produced or used at the trial and it was not shown that any effort had been made to obtain them. While those registration cards would not show the unavailability of rooms, the cards would, it seems, indicate, during the period of the last three years of lessee's operation, the percentage of occupancy of the tenantable rooms.
There were other statements made by the plaintiff in his testimony to which defendant directs our attention, but, as we construe them, they went to the weight to be given plaintiff's testimony rather than to the sufficiency of the evidence as a whole to have supported a prima facie case of loss of profits.
There is no disagreement between the parties that prospective profits which are proved with reasonable accuracy and certainty may be recovered in an action based on the failure of a landlord to repair. It is essential, however, that plaintiff show not only that he suffered damages but he must also show the amount of the damages with sufficient certainty "to warrant the jury in estimating their extent." Tnemec Co. v. North Kansas City Development Co., Mo., 290 S.W.2d 169, 174 [4-6]. See annotations in 28 A.L.R. 1448, 1510e; 28 A.L.R. 2d 486, 487, § 29. True, in some cases all that can be required is to produce all the relevant facts tending to show the extent of damage and one is not to be excused for a breach of contract resulting in damages simply because those damages may not be established with exact certainty. Wright v. Ickenroth, Mo.App., 215 S.W.2d 43, 45 [6, 7]. It has been said, however, that the amount of estimated loss of earnings (and the same would apply to loss of prospective profits) should, in the event of uncertainty, at least be supported by the best evidence available. Moss v. Mindlin's, Inc., Mo., 301 S.W.2d 761, 773 [12].
Construing all the evidence as to the extent of damages most favorably from plaintiff's standpoint, we are constrained to hold that plaintiff did adduce substantial evidence sufficiently certain as to the extent of damages sustained to support the amount of the verdict. As will appear hereinafter, this case must be reversed and remanded because of erroneous instructions. Consequently, we observe for whatever it may be worth that the record as to the extent of plaintiff's damage is not as satisfactory as it apparently could have been and, in order to obviate future questions as to the sufficiency of the evidence as to the extent of damage sustained, particularly future questions as to excessiveness *570 of verdict, plaintiff would be well advised to adduce or account for any and all records which would aid in tending to more accurately establish the amount of dollar damage sustained.
Defendant's contention that the trial court erred in giving instructions 1 and 2 must be sustained. It is necessary for an understanding of our ruling in that respect to review some of the evidence. Plaintiff testified that on November 25, 1945, when he and his agent, in the presence of defendant, were looking at the hotel property to determine whether to lease it, he placed a sheet of paper (instant Exhibit A) on a clipboard, dated the paper 11/25/45, that day's date, and then, as he went through the building he indicated on the paper the items of repair which the owner would have to accomplish as a condition precedent to his leasing the hotel. He wrote on the exhibit, "Mrs. Sample agrees to the Following," and thereafter listed these eight things: fix floors in dining room, fix screens, plaster rooms 200 and 214, rest room, and bath, fix plumbing all in good order, fix boiler, paint building, screen back porch, and fix sewers to kitchen and dining room. Plaintiff also testified that when he met with defendant on December 1, 1945, for the purpose of executing the lease, he refused to sign because the items listed above had not been incorporated in the lease. A discussion ensued and, as a result, Exhibit A was made a part of the lease by physical attachment thereto and it was understood that it formed a part of the lease when the parties signed.
Plaintiff testified that defendant did not make any of the repairs itemized on Exhibit A except that defendant plastered the mentioned rest room and bath about a year before the hotel closed, and painted the building in 1951 or 1952. As to the other listed items, plaintiff made some repair to the dining room floor, fixed the sewer to the kitchen and dining room, and made some repair of the furnace, which may have been a part of the listed item, "fix boiler." There was no testimony, however, as to whether any damage accrued to plaintiff by reason of the failure of defendant to have accomplished the listed repairs and there was no testimony as to the amount of damage sustained by plaintiff by reason of his having accomplished certain of the listed repairs. A jury, perhaps, reasonably could have found that some damage did accrue to plaintiff by reason of defendant's failure to have repaired and by reason of plaintiff's having done some of the repairs himself, but there was no evidence whatever which would warrant a jury in estimating the extent of any such damages.
Further, there was evidence that plaintiff operated the hotel coffee shop for a period of time and thereafter subleased it to and sold the coffee shop equipment to a Mr. Sauer. There was also evidence that defendant did not fix the kitchen floor or the coffee shop floor. Even if it be assumed that the repair listed on Exhibit A as "Fix Floor in Dining Room" included or referred to the coffee shop floor, nevertheless there was no evidence whatever that any damage accrued to plaintiff by reason of defendant's failure to have fixed that floor.
Under that evidence, the court gave instructions 1 and 2 (our italics):
1. "The Court instructs the jury, if you find and believe from the evidence, that on the first day of December, 1945, the defendant, Mrs. E. A. Sample, by an instrument in writing leased to the plaintiff, James B. Hargis, the St. Francois Hotel and Coffee Shop, located in the City of Farmington and the State of Missouri, for a period of ten years; and that said lease contained provisions whereby the defendant, Mrs. E. A. Sample, would take care of all outside repairs, including screens, fix the floor in the dining room, plaster room 200-214, rest room and bath, fix plumbing all in good order, fix boiler, paint building, screen back porch, fix sewer to kitchen and dining room; and if you further find and believe from the evidence *571 that the defendant, Mrs. E. A. Sample, failed and refused to make all or a part of said repairs, and if you further find and believe from the evidence that as a result of said failure, if you find defendant did so fail, and during the term of the lease a number of the rooms in the St. Francois Hotel and the Coffee Shop became and were rendered unfit as hotel rooms and as a coffee shop by reason of said failure, if you find the defendant Mrs. E. A. Sample did so fail, and if you further find and believe from the evidence that said rooms and said coffee shop continued untenable for the reason of the failure of the defendant, Mrs. E. A. S.ample, to repair in accordance with the terms of said contract, if you so find and believe, and that as a result of the failure of the defendant to repair said St. Francois Hotel and Coffee Shop in accordance with the terms of said contract, the plaintiff was damaged, if you so find and believe, then you will find the issue in favor of the plaintiff, James B. Hargis, on plaintiff's petition and against the defendant, Mrs. E. A. Sample."
2. "The court instructs the jury that, if you find the issues in favor of the plaintiff and against the defendant on plaintiff's petition, you will assess plaintiff's damages in such sum as you may find and believe from the evidence will reasonably compensate plaintiff for his loss of profits in the operation of the St. Francois Hotel, if any, as mentioned in the evidence, which in no event shall exceed the sum of Twenty Thousand Dollars ($20,000.00), the amount sued for."
It is clear that by instructions 1 and 2 read together the court authorized the jury to find that damages had accrued to plaintiff, and authorized the jury to award monetary damages to plaintiff, because of defendant's failure to have accomplished the repairs listed on Exhibit A and for failure to have repaired the coffee shop. That such was erroneous is apparent because, as we have heretofore pointed out, there was no evidence adduced which would warrant the jury in fixing the extent of any damage that might have accrued by reason of the failure of defendant to accomplish repairs listed on Exhibit A and there was no evidence that any damage accrued to plaintiff by reason of defendant's failure to repair the coffee shop. True, the instructions encompass (and in instruction 1 conjunctively) the finding of and the award of damages for loss of profits accruing by reason of defendant's breach of her covenant to make outside repairs, and we have held that issue was supported by sufficiently definite evidence. But it is impossible to tell from the instructions considered together whether the amount of the jury's verdict includes only loss of profits from failure to make outside repairs or whether it also includes damages for failure to make the repairs on Exhibit A or failure to repair the coffee shop. And, as we have held, there was no sufficient evidence to support an award of damages as to those last-mentioned items. At the very least a jury likely would believe that the court intended to authorize a finding of and an award for loss of profits accruing by reason of failure to make the repairs on Exhibit A and failure to repair the coffee shop, a finding and an award which were not substantiated by the evidence.
We need not determine the validity of the other attacks made on instructions 1 and 2 as plaintiff undoubtedly will have in mind defendant's further contentions in the event of a retrial. It is desirable, however, to deal with the two instances in which defendant claims the trial court erred in the admission of evidence because of the likelihood of a recurrence of the same questions. As noted, Exhibit A was the piece of paper on which were listed the repair items which plaintiff claimed defendant had agreed to accomplish prior to or shortly after the beginning date of the lease. We have heretofore rather fully set forth plaintiff's testimony with regard to that exhibit and it is here only necessary to point out that Exhibit A, dated November 25, 1945, was attached to the lease at the time it was signed on December 1, 1945, and that plaintiff and defendant understood that Exhibit A was a part of the lease.
*572 True, there was testimony that Exhibit A was not attached when the lease was recorded and it is true that there was blank space provided in the lease where the items (from Exhibit A) could have been inserted, and defendant testified that she had never heard of or seen Exhibit A and that it was never a part of the lease. Those matters went to the weight of plaintiff's testimony with respect to the lease and not to the admissibility of the exhibit.
Defendant contends that the action of the court in admitting Exhibit A was tantamount to permitting plaintiff to very the terms of a written contract by parol evidence. The fallacy of that argument is that plaintiff's testimony was that Exhibit A was a part of the original written contract. If so, no questions of difference in dates on the exhibit and the lease or whether the exhibit was integrated into the lease, are relevant. The jury reasonably could have found Exhibit A was part of the only written contract between the parties, and thus the exhibit was properly admitted.
Defendant also contends that the trial court erred in admitting in evidence a letter offered during plaintiff's rebuttal (Exhibits XI and X2) which plaintiff's attorney had written to defendant on March 9, 1946, about three months subsequent to the date of the lease. The letter contains eleven numbered paragraphs and plaintiff offered, and the court admitted, all of the paragraphs except 8 and 9. The letter is two pages long but suffice to here say that it consists of a series of statements setting forth plaintiff's attorney's view that defendant had not made repairs on the building as agreed and setting forth plaintiff's attorney's views about various other matters that had arisen in connection with the hotel. The letter is extremely argumentative in nature and of course was hearsay in so far as it was offered as proof of the truth of the statements therein made.
But plaintiff here contends that the letter was admissible on two grounds: first, because it impeached the testimony of defendant who denied receiving the letter; and second, because it was notice to defendant of the fact that plaintiff claimed certain repairs had not been made as agreed. Neither contention is tenable. First, the witness' testimony that he deposited the letter in the mail, postage prepaid, accomplished the impeachment of the testimony of defendant that she had not received the letter. The disclosure of the contents of the letter did not tend to contradict defendant's denial of its receipt.
Secondly, the only repairs which, according to the pleadings and evidence, plaintiff claimed defendant had agreed to make and for failure to have so made plaintiff sought damages, were outside repairs and the eight items set forth on Exhibit A. In so far as the items set forth on Exhibit A were concerned, no notice with respect to those was necessary and the evidence of notice as to those was immaterial. That is to say, if according to plaintiff's testimony, there was an agreement that defendant would make the specific repairs listed on Exhibit A, and plaintiff's evidence showed that defendant in violation of that agreement failed to make those repairs, whether defendant had notice that plaintiff claimed that defendant had so failed was wholly immaterial to any issue in the case.
All of the eleven paragraphs of the letter (except paragraph 7) dealt either with items contained on Exhibit A or with items as to which there was no pleaded or proved agreement and which apparently were subjects of disputes between the parties entirely collateral to the provisions of the lease with or without Exhibit A as a part thereof. As noted, the lease provided that defendant would make outside repairs. As to those, it was necessary that she be advised of the need for the repair or that such need appear to defendant in some other manner. Consequently, it would have been material to have shown in evidence that plaintiff claimed the necessity for a certain outside repair, irrespective of the validity of the claim, and such proof would have properly come in plaintiff's case in chief rather than in rebuttal. In any event, however, the only paragraph of the letter *573 (paragraph 7) which dealt with an outside repair (in addition to the specific repairs mentioned on Exhibit A) contained the complaint that when it rained, water ran into the basement due to defective and broken gutters and downspouts on the building. While the gutters and downspouts came under "outside repairs," the fact was that there had been no evidence in the case of any damage accruing to plaintiff by reason of water running into the basement. Consequently it is apparent that even paragraph 7 was not admissible in rebuttal. It follows that the trial court erred in admitting the letter, plaintiff's Exhibits XI and X2, in evidence.
For the noted error in giving instructions 1 and 2, the judgment is reversed and the case is remanded for a new trial.
VAN OSDOL and HOLMAN, CC., concur.
PER CURIAM.
The foregoing opinion by COIL, C., is adopted as the opinion of the court.
All concur.
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306 S.W.2d 662 (1957)
John Lee VARBLE and Beverly Ann Varble, minors, by and through their father and natural guardian, John Varble, Plaintiffs-Respondents,
v.
Harry STANLEY, Defendant, State Automobile Insurance Association, Garnishee-Appellant.
No. 7645.
Springfield Court of Appeals. Missouri.
October 29, 1957.
*663 Orville C. Winchell, Lebanon, for garnishee-appellant.
J. W. Grossenheider, Lebanon, for plaintiffs-respondents.
RUARK, Judge.
This is an appeal by the liability insurergarnishee from a judgment rendered in favor of the plaintiffs-garnishors, who previously had judgment against one Harry Stanley. Said Harry was the seventeen-year-old son of the named insured and was the driver of the automobile involved in the collision which gave rise to the damage suit.
Under the policy "Definition of Insured," omnibus liability protection was extended to "any person while using the automobile *664 * * * provided the actual use of the automobile is by the named insured or such spouse or with the permission of either."
Attached to the policy and made a part by reference (to "Form No. 5-60 Nebr., " following the listing of coverages on the declarations page) was a sheet entitled "PRIVATE PASSENGER AUTOMOBILE CLASSIFICATIONS (Rating InformationBodily Injury, Property Damage, Collision)." Under this title heading appeared the statement, "The classification and rate assigned to the automobile on the basis of the Company's information when the policy is written is designated below by the letter `X.'" Following this were seven blank squares, opposite each of which were one or more paragraphs describing the situation in regard to the use and operation of the automobile and the age and status of the operator thereof. Opposite the particular square which bore an "X" was the writing:
"Class 1a means
"1. use of the automobile is not required by or customarily involved in the occupational duties of any person except in going to and from the principal place of occupation a distance of less than ten road miles one way.
"2. there is no male operator of the automobile under 25 years of age resident in the named insured's household or employed as a chauffeur of the automobile.
"NoteAutomobiles Owned by ClergymenProvisions with respect to the use of the automobile in the occupational duties do not apply to the automobiles owned by clergymen."
The sheet so referred to was not a part of any application by the insured and is signed only by the printed signature of the garnishee insurer and followed by the signature of the secretary of the insurer's attorney in fact.
Our first question is whether the above writing limits and excludes coverage when the automobile is operated by any male operator under twenty-five years of age who is a resident of the named insured's household. Appellant so contends.
It is not contended that the insured misrepresented the status of affairs in her household. In fact, there is no evidence that the son was a member of the household when the policy was issued. Nor is there any evidence that the son had ever driven the automobile upon the roads or streets prior to the occasion of the collision which resulted in this suit. If we are able to interpret appellant's argument, it is that the words in themselves constitute a limitation, a continuing warranty, or an exclusion of liability. We think they do not.
The sheet on its face is shown to be the insurer's own classification made for the purpose of fixing rates, this classification being based upon the condition of affairs found and determined by the insurer at the time of issuance of the policy. It does not contain any provision that the liability is excluded if a male operator (or a female operator, for that matter) who is under a certain age shall drive the car. The fact that it mentions only a male operator who is a member of the household in itself indicates that it is aimed at describing and defining the situation of the parties and the character of the risk involved at the time the policy was issued, and that it is not aimed at excluding liability under all circumstances for operation by all persons under the age of twenty-five years.
Since there is no express provision which excludes liability, the appellant's position must depend upon the assumption that the statements made in the classification sheet imply a warranty or exclusion.
All provisions of the policy must be given their plain and reasonable meaning, and all parts thereof must, if possible, be harmonized and given effect in order to *665 accomplish the intention of the parties.[1] But an insurance policy, being a contract designated to furnish protection, will, if reasonably possible, be construed so as to accomplish that object and not to defeat it.[2] Hence, if the terms are susceptible of two possible interpretations and there is room for construction, provisions limiting, cutting down, or avoiding liability on the coverage made in the policy are construed most strongly against the insurer.[3]
If the insurer intended to exclude or limit its liability in instances of operation by a male member of the household under twenty-five years of age, it could and should have said so in plain and explicit language.[4] And we will not adopt a construction which will imply such exclusion from language which would amount to the planting of a forfeiture in ambush.[5] We hold against appellant on this assignment.
Our next question arises on the appellant's contention that its motions to dismiss at close of evidence should have been sustained. This requires an examination of the evidence to determine whether there was a submissible case on the issue of whether there was a permissive use so as to bring the driver under the omnibus clause.
The collision occurred at approximately 6:30 p.m. of October 8, 1956. At that time Tillie Stanley, illiterate, had a husband, Leonard (illiterate), a son Harry (also illiterate), some other children, a 1956 Buick Special hardtop, and a liability policy. The family lived in a trailer at or beside or behind Wrink's Market in Lebanon, Missouri. Leonard, the father, painted roofs for a living. Harry, then age seventeen, helped his father in this work. The father had a truck which he used "to paint out of."
Sometime between 5:00 and 6:00 p.m., Harry took the Buick Special hardtop and drove out several miles from Lebanon to see a man about a painting job. He said he did this because he had worked in that vicinity some time previous, had talked to a woman about a painting job, and she had told him to come back and discuss it with her husband. It was while returning to Lebanon that Harry had the collision which led to this suit. A highway patrolman testified that he investigated the collision at the scene; that Harry had the keys to the Buick and told him that he had been out to see a man about a roofing job; that he had Harry drive the Buick back to the market and followed him; that when or after they arrived both parents were at the trailer and the trooper told the father about the accident and the father said, or told him, that the boy had been out in the country to see a man about a roofing job.
*666 Harry, for garnishee, testified that he took the car without permission from or knowledge of either of his parents. He said that he had never been authorized or permitted by either to drive the Buick upon the streets or roads but had been permitted to operate it to the extent of backing or moving the trailer forward, and in parking it on the trailer space; that the Buick had an automatic transmission and that he could "read the numbers" on it; that when he got the car there were no keys in it, but that he started the car"Well, she has an automatic switch. If you don't put it on the lock you can just put her over and she will start up. If you turn it on `lock' she won't." He said his father did not send him out to see about the job.
"Q. When is the first time you told your mother or your dad you had the car? A. Well, I didn't tell them until I pulled up in the place and they seen the car wrecked and I told my dad."
Tillie Stanley (the mother) testified for garnishee that she owned the Buick, which had an automatic switch, that "without it is locked you can use it"; that she never at any time gave Harry permission to drive the car and he had never driven it before that date except "if he had to move around the trailer for another car or truck; it was awful crowded" ; that he had never driven it on the road. She said that on that evening Harry came in from work and washed his hands in the trailer and went outside, and that she did not see her son leave. "I were cooking supper with the curtains pulled and the children were looking at television." Her husband was out behind the trailer fixing a wooden doorstep. (Where the Buick was parked and whether the father was in its immediate vicinity at the time the son left the lot is not shown.) The first she knew her son was gone was when "I called for supper and he were gone." Leonard Stanley, the father, testified that he had never given Harry permission to drive the Buick on the road, did not on this occasion, and did not see Harry drive the car off; that he did not send the boy out to see about the job and the first he knew that Harry had the automobile was "when I seen the cars come in with the lights on and run out and seen the wreck and the trooper was with him."
This was all the testimony in reference to permission except some impeachment testimony which respondents concede in their argument was not competent for the purpose of proving such permission. The respondents, while conceding that there is no direct proof of permission, argue that the court properly submitted and the jury had a right to find such because an inference of permission could be drawn from the evidence.
There is no question that the permission provided in the omnibus clause can be either express or implied from the conduct of those in a position to give it.[6] But as a general rule the person claiming such permission must prove it,[7] and no implied permission can arise merely because someone obtained possession of the property and used it without the knowledge of the named insured. The inference of agency is somewhat akin to the question here, since the relationship of agency involves the element of consent. It can be inferred, but the law indulges no presumption that it exists, and if it is to be inferred it must be from a natural and reasonable and not a forced or strained or distorted construction of the *667 facts.[8] It is true that in some jurisdictions there is a presumption that one who drives a car does so with permission of the owner. But such presumption, if it did exist in this state, would avail the plaintiffs nothing, because it drops out upon receipt of direct evidence to the contrary.[9]
Although a plaintiff may not rest his case upon a presumption, he may nevertheless establish it by inference.[10] But such inference must be drawn from substantial and probative evidence which is sufficient to lead to a conclusion as to a certain result which, according to the common experience of mankind, follows naturally and usually from the given state of facts and which at the same time logically and according to the common experience of mankind excludes a different result or conclusion.[11]
Plaintiffs argue that a legitimate inference of permission may be made from the following facts:
(a) According to the trooper, the boy had the car keys (whether in the switch or in his pocket is not shown). This involves (1) the assumption that the keys were given him by one of his parents instead of coming into his possession by stealth or other means; and (2) the assumption that the assumed delivery of the keys was to accomplish the driving of the car on the road (and not for some other purpose)two inferences leap-frogging down one fork of a bifurcated road. We think bare possession of automobile keys, alone and of itself, is not a fact which would reasonably justify a conclusion that the possessor is authorized to drive the car, although it might be strong support for such when accompanied by other sufficient facts and circumstances.
(b) The patrolman testified that when (or after) they drove into the trailer lot, the boy leading and the patrolman following, the father said that the boy had been out to see a man about a roofing job. When did the father make this statement ? Was it before, or after, the boy told, or had an opportunity to tell, his father where he had been? The record does not show. In any event, the best that it would show was a knowledge on the part of the father (whether acquired before or after) that the son was going (or had gone) to see about the job. Assuming that the father knew about the possibilities of the job and directed, or assented to, the son's going, can we infer that the son was to take the car rather than use some other means? (There is no evidence as to whether the boy was in the habit of driving the paint truck with the parents' consent.) If the evidence showed that the father was in the sight and vicinity of the car when the boy left with it, we would have a situation which might call for reasonable deduction that the father, at least impliedly, assented to the taking, but we have no right to infer it from the facts shown here.
(c) The boy had permission to drive or shift the car on the trailer lot. Plaintiffs make an unfair appropriation of this fact by lifting it from the testimony of garnishee's *668 witness out of context. A fair statement of the testimony of the parents is that the boy was not permitted to drive the car except in shifting or parking it upon the lot. The drawing of an inference that this gave permission to drive on the road is in contradiction of the sense of the whole statement. It is like seizing upon a statement, "I never go fishing except on the Gasconade," and saying, "Ha! He fishes; therefore we may reasonably assume that he was trolling for bass on the Lake of the Ozarks."
(d) Finally there is the contention that the fact the illiterate boy knew how to drive the car gives reason for inferring that he was authorized to drive it at the time and place here involved. Ignoring the evidence to the effect that Harry had been permitted to start, stop, back, and park the car on the trailer lot, and also ignoring the fact that the father used a truck in the business at which Harry helped, we are still of the opinion that the fact that a seventeen-year-old knows how to drive an automobile (new or old) is not evidence from which a fair or logical conclusion can be drawn that the parents authorized or permitted the driving of any one particular motor vehicle on any specific occasion. Seventeen-year-olds usually know how to drive the regular makes of motor vehicles, and we might suggest that they usually can drive better, although unfortunately not with as much judgment or care as their elders. They acquire this knowledge in many devious and mysterious ways, just as they acquire knowledge of the birds and bees. We cannot infer that simply because one of that age knows how to drive a car the parents gave him permission to drive it, any more than we can infer that because they know about the birds and bees the parents authorized and permitted them to engage in a project which indicates knowledge of that subject.
We are not able to take any of these facts, singly or in combination, and arrive at a conclusion which reasonably points to the fact in issue, i.e., that of permission to drive the car on this occasion, and which just as reasonably excludes a logical conclusion to the contrary. True, it is possible and may be speculated that the son was permitted to drive the car on this occasion, but mere possibilities and speculation are not enough to make a submissible case. However, a retrial might explain or develop with certainty matters which in this record are left vague and indefinite. We are of the opinion that the judgment should be reversed and the case remanded. It is so ordered.
McDOWELL, P. J., and STONE, J., concur.
NOTES
[1] 44 C.J.S. Insurance § 296, p. 1163; 5A Am.Jur., Automobile Insurance, Sec. 3, p. 8; Soukop v. Employers' Liability Assurance Corp. of London, 341 Mo. 614, 108 S.W.2d 86, 112 A.L.R. 149; Lynch v. National Life & Acc. Ins. Co., Mo. App., 278 S.W.2d 32; State ex rel. Mutual Ben. Health & Acc. Ass'n v. Shain, 350 Mo. 422, 166 S.W.2d 484; Schmidt v. Utilities Ins. Co., 353 Mo. 213, 182 S.W.2d 181, 154 A.L.R. 1088.
[2] 44 C.J.S Insurance § 291, pp. 1151, 1152; Bonzon v. Metropolitan Life Ins. Co., Mo. App., 143 S.W.2d 336; Hoover v. National Casualty Co., 236 Mo.App. 1093, 162 S.W.2d 363; De Mun Estate Corp. v. Frankfort General Ins. Co., 196 Mo.App. 1, 187 S.W. 1124, 1126; Kimbrough v. National Protective Ins. Ass'n, 225 Mo. App. 913, 35 S.W.2d 654.
[3] Freese v. St. Paul Mercury Indemnity Co., Mo.App., 252 S.W.2d 653; Boecker v. Aetna Casualty & Surety Co., Mo.App., 281 S.W.2d 561; Graham v. Gardner, Mo.App., 233 S.W.2d 797; Chamberlain v. Mutual Ben. Health & Acc. Ass'n, Mo.App., 260 S.W.2d 790; Bituminous Casualty Corp. v. Walsh & Wells, Inc., Mo.App., 170 S.W.2d 117, at page 121, and cases cited; Consolidated Elec. Coop. v. Employers Mutual Liability Ins. Co., D.C.E.D.Mo., 106 F. Supp. 322.
[4] 45 C.J.S. Insurance § 585, p. 380; Kimbrough v. National Protective Ins. Ass'n, 225 Mo.App. 913, 35 S.W.2d 654, 658; Rosen-Reichardt Brokerage Co. v. London Assur. Corp., 214 Mo.App. 672, 264 S.W. 433, 435.
[5] State ex rel. Mills Lumber Co. v. Trimble, 327 Mo. 899, 39 S.W.2d 355, 358.
[6] Hawkeye Casualty Co. v. Rose, 8 Cir., 181 F.2d 157; Stoll v. Hawkeye Cas. Co. of Des Moines, 8 Cir., 193 F.2d 255; Aetna Life Ins. Co. v. Chandler, 89 N.H. 95, 193 A. 233; see 5A Am.Jur., Automobile Insurance, sec. 94, p. 92; see Annotation 5 A.L.R.2d, Automobile Insurance, sec. 6, p. 608; Annotation 160 A.L.R., Automobile Insurance, p. 1202; Annotation 126 A.L.R., Automobile Insurance"Omnibus" Clause, VI, p. 550.
[7] See Annotation 72 A.L.R., Automobile Insurance"Omnibus" Clause, VI, p. 1388.
[8] E. B. Jones Motor Company v. Pullen, Mo.App., 298 S.W.2d 448; Wyler Watch Agency v. Hooker, Mo.App., 280 S.W.2d 849, at page 856 and cases cited; and see State ex rel. Massman v. Bland, 355 Mo. 17, 194 S.W.2d 42, in regard to inferring agency from possession of boards and a truck taken from defendant's farm.
[9] See Appleman, Insurance Law and Practice, vol. 21, sec. 12274, p. 127, and cases there cited.
[10] For distinction between presumption and inference, see State ex rel. Wallach v. Raeder, Mo.App., 196 S.W.2d 19; Jones v. Phillips Petroleum Co., Mo.App., 186 S.W.2d 868; Finks v. Viking Refrigerators, Inc., 235 Mo.App. 679, 147 S.W.2d 124.
[11] For definitions and discussion of substantial evidence and inferences, see Hogue v. Wurdack, Mo.App., 298 S.W.2d 492; Davis v. State Department of Public Health and Welfare, Mo.App., 274 S.W.2d 615; Vietmeier v. Voss, Mo., 246 S.W.2d 785; Collins v. Division of Welfare, 364 Mo. 1032, 270 S.W.2d 817; Berry v. McDaniel, Mo.App., 269 S.W.2d 666.
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205 B.R. 323 (1996)
In re Frank Paul BUCCO, Debtor.
Bankruptcy No. 96-04949-6B3.
United States Bankruptcy Court, M.D. Florida, Orlando Division.
October 2, 1996.
Andrew Baron, Orlando, FL, for Debtor.
Laurie K. Weatherford, Trustee, Winter Park, FL.
MEMORANDUM OPINION
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came before the Court on the Trustee's Motion to Dismiss Case for Bad Faith Filing (Doc. 7). Appearing before the Court were Andrew Baron, counsel for the Debtor, Frank Paul Bucco; and the Trustee Richard A Palmer. After reviewing the Motion, arguments of counsel, and authorities for their respective positions, the Court makes the following Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
Frank Paul Bucco ("Debtor") filed for relief under Chapter 13 of the Bankruptcy Code on August 2, 1996. Trustee's Motion to Dismiss case for Bad Faith was filed August 15, 1996. The Debtor has filed for relief under Chapter 13 of the Bankruptcy Code twice previously.
Debtor's first filing was on January 6, 1995, Case No. 95-00083-6B3. The Debtor made payments totalling $2,068.10, but failed to bring payments current. The Trustee motioned for the Entry of an Order Dismissing the Case and the Court granted the Trustee's Motion for Dismissal on February 2, 1996. The Debtor was enjoined from filing for relief under Title 11 of the United States Code for a period of 180 days.
*324 The Debtor's wife, Kathleen Bucco ("Mrs. Bucco"), filed for relief under Chapter 13 of the Bankruptcy Code on July 7, 1995 while the Debtor was enjoined from filing for relief. Mrs. Bucco's voluntary petition was dismissed by the Court on the Trustee's Motion for the Entry of an Order of Dismissal of her case. Furthermore, Mrs. Bucco was enjoined from filing for relief under Title 11 of the United States Code for a period of 180 days.
The Debtor, after the 180 day injunction expired, filed for relief under Chapter 13 of the Bankruptcy Code on November 14, 1995, Case No. 95-06102. The Debtor made no payments and failed to bring the plan current. The Court dismissed the Debtor's voluntary petition on the Trustee's Motion for an Entry of Dismissal of the case on May 15, 1995. The Debtor was additionally enjoined from filing for relief under Title 11 of the United States Code for a period of 180 days.
Mrs. Bucco, once her 180 day injunction expired, filed for relief under Chapter 13 of the Bankruptcy Code on March 22, 1996. Mrs. Bucco filed a Motion to Dismiss the Case and the Court granted her a voluntary dismissal. Mrs. Bucco was enjoined 180 days from the entry of the Order from filing for relief under Title 11 of the United States Code.
CONCLUSIONS OF LAW
The issue before the Court is whether the Debtor's petition for relief under Chapter 13 of the Bankruptcy Code should be dismissed for lack of good faith. Section 1307(c) of Title 11 provides that upon request of a party in interest or the United States Trustee, a court may dismiss a case under this chapter for cause and lists a number of bases for dismissal. 11 U.S.C. § 1307(c). Although a lack of good faith is not enumerated as a specific basis for dismissal, courts have recognized lack of good faith as cause for dismissal of a Chapter 13 case. In re Love, 957 F.2d 1350, 1354 (7th Cir.1992); In re Stathatos, 163 B.R. 83, 87 (N.D.Tex.1993); In re Powers, 135 B.R. 980, 991 (Bankr.C.D.Cal. 1991); Ekeke v. United States, 133 B.R. 450, 452 (S.D.Ill.1991) (stating that by the terms of 1307(c), the enumerated causes of 1307(c) are not exhaustive).
A Motion to Dismiss a Chapter 13 case for lack of good faith is measured by the same standard for determining good faith at confirmation under § 1325(a)(3). In re Earl, 140 B.R. 728, 733 (Bankr.N.D.Ind.1992). Section 1325(a)(3) expressly requires that a Chapter 13 plan be proposed in good faith. 11 U.S.C. § 1325(a)(3). An abuse of Chapter 13 depends on the circumstances of the case. In re Terry, 630 F.2d 634-35 (8th Cir.1980).
The serial filing of bankruptcy cases by the Debtor and his spouse for the purpose of forestalling a foreclosure action should be dismissed for lack of good faith. In re Earl, 140 B.R. at 739. One of the purposes of the Bankruptcy Act is to relieve the honest debtor of oppressive indebtedness and permit him to start afresh. The serial filings are an abuse of the provisions, purpose, and spirit of Chapter 13. Accordingly, this case is dismissed for cause, pursuant to 11 U.S.C. § 1307(c), as not being filed in good faith in that it was filed in order to frustrate Great Western Bank's right to foreclose on its security. The Trustee's Motion to Dismiss Case for Bad Faith is granted.
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893 S.W.2d 354 (1995)
48 Ark.App. 219
Tommy TOLSON and Tammy Tolson, Appellants,
v.
Mary Tolson DUNN, Appellee.
No. CA 94-155.
Court of Appeals of Arkansas, Division I.
March 1, 1995.
*355 Harold King, Little Rock, for appellants.
J. Larry Allen, Sheridan, for appellee.
ROGERS, Judge.
This appeal arises from a judgment of the Grant County Chancery Court finding that appellants had failed to prove an oral contract existed between the parties and denying their claim for specific performance, adverse possession, and the value of the improvements they had placed on appellee's property. On appeal, appellants argue three points for reversal. We find no merit in appellants' arguments and affirm.
For their first point, appellants contend that the chancellor erred in denying them specific performance. Appellants claim that the parties entered into an oral agreement in 1987 whereby appellee, appellant Tommy Tolson's mother, agreed to deed them certain land when appellants completed building a house on the land. Appellants contend that, after the construction was completed, appellee refused to transfer title to the property to them and, therefore, appellee should be ordered to specifically perform the parties' agreement.
Tommy Tolson testified that he moved on appellee's land in 1980-81; that he started constructing a home with appellee's permission; that appellee promised to give him a deed to the land; and that, based on that promise, he built another room onto the structure. He stated that he completed the structure in 1992 and that he would not have made the improvements if appellee had not told him he was going to get a deed. He stated that he borrowed some money from First National Bank to build two more rooms and that appellee knew he was borrowing the money and she signed the loan document.
Gerald Edwin Whitehead, a certified residential appraiser, testified that he placed a value of $8,300.00 on the structure built by appellants.
Appellee, Mary Tolson Dunn, testified that she allowed appellant, Tommy Tolson, to build a little shack on the property in 1980 because he had no job and no place to go and that she bought the lumber he used. She stated that she told him to move when he first got married, but she did not want to take her own son to court. She further testified that her son never asked her for the land and she never promised it to him.
John Tolson, appellee's son and appellant Tommy Tolson's brother, testified that he had heard his mother ask appellant to leave and that appellant did not respond.
Appellants allege that the facts in this case are nearly identical to those in Humann v. Renko, 2 Ark.App. 32, 616 S.W.2d 26 (1981). We disagree. In Humann, the chancellor found that the appellees had met their burden of proving an oral contract where there was testimony of the neighbors to support the appellees' testimony and where appellant, when confronted with the testimony, never directly contradicted it. No such evidence exists in the case at bar.
Chancery cases are reviewed de novo on appeal, and the appellate court will not disturb the chancellor's findings unless they are clearly erroneous or clearly against the preponderance of the evidence, and because the question of the preponderance of the evidence turns largely on the credibility of the witnesses, the appellate court will defer to the chancellor's superior opportunity to assess credibility. Appollos v. Int'l Paper Co., 34 Ark.App. 205, 808 S.W.2d 786 (1991); Ark.R.Civ.P. 52(a). The testimony here was disputed regarding whether there was an agreement between the parties, and therefore, this presented a question for the factfinder. The chancellor found that appellants had failed to prove an oral contract existed, and this court cannot say this finding is clearly against the preponderance of the evidence. Because the chancellor found that no oral agreement existed between the parties, appellants were not entitled to specific performance. See Fisher v. Jones, 306 Ark. 577, 816 S.W.2d 865 (1991).
Appellants contend for their second point that the chancellor erred in finding that they had not established title to the property by adverse possession. Appellants argue that because the testimony was clear and undisputed that appellants took possession in 1980, commenced construction in 1981, and appellee *356 did nothing to interrupt their possession until 1991, they proved their claim to adverse possession. We disagree.
Whether possession is adverse to the true owner is a question of fact. Sharum v. Terbieten, 241 Ark. 57, 406 S.W.2d 136 (1966). In order to establish title by adverse possession, appellants had the burden of proving that they had been in possession continuously for more than seven years and their possession was visible, notorious, distinct, exclusive, hostile, and with the intent to hold adversely against the true owner. Clark v. Clark, 4 Ark.App. 153, 632 S.W.2d 432 (1982). If the original use and possession were permissive, it cannot become adverse until notice of the hostility of the possessor's holding has been brought home to the owner by actual notice or by a holding so open and notorious as to raise a presumption of notice equivalent to actual notice; the evidence of the adverse holding when the original entry is by permission must be very clear. Mikel v. Development Co., 269 Ark. 365, 602 S.W.2d 630 (1980). Although we review chancery cases de novo on the record, we do not reverse the decision of the chancellor unless his findings are clearly against the preponderance of the evidence. Hicks v. Flanagan, 30 Ark.App. 53, 782 S.W.2d 587 (1990).
Here, appellant Tommy Tolson admitted at trial that he began building his house on appellee's land in 1981 with appellee's permission. Later, at the conclusion of the hearing, he testified that he moved onto the property with appellee's permission and remained there with appellee's permission. He also stated that appellee did not ask him to move from the property until 1992. It is clear from the record that appellants had permission from appellee to remain on the property and consequently their possession was not adverse to the titleholder. Therefore, the chancellor's finding that appellants had failed to sustain their claim of adverse possession is not clearly against the preponderance of the evidence.
For their final point, appellants contend that the chancellor erred in not awarding them the value of the improvements they placed on appellee's property. Appellants' expert witness valued these improvements at $8,300, and appellants contend they should have been awarded damages for this amount. In support of their claim, they rely on Ark. Code Ann. § 18-60-213 (1987), that provides in part:
(a) If any person believing himself to be the owner, either in law or equity, under color of title has peaceably improved, or shall peaceably improve, any land which upon judicial investigation shall be decided to belong to another, the value of the improvement made as stated and the amount of all taxes which may have been paid on the land by the person, and those under whom he claims, shall be paid by the successful party to the occupant, or the person under whom, or from who, he entered and holds, before the court rendering judgment in the proceeding shall cause possession to be delivered to the successful party.
This section requires one entitled to recover for such improvements to meet two tests: (1) he must believe himself to be the owner of the property; and (2) he must hold under color of title. Smith v. MRCC Partnership, 302 Ark. 547, 792 S.W.2d 301 (1990). In Baker v. Ellis, 245 Ark. 484, 432 S.W.2d 871 (1968), the supreme court stated:
One who believes himself to be the legal or equitable owner and improves land of another, under color of title, can recoup the cost of the improvements. Ark.Stat.Ann. § 34-1423 (Repl.1962) [now codified at § 18-60-213]. Color of title generally connotes an instrument which by apt words of transfer passes what purports to be a title but which is defective in form. Id. at 486, 432 S.W.2d at 872.
Here, it was undisputed that appellants had no writing evidencing color of title nor had they paid any taxes on the property. Appellants argue, however, that this court should reverse the holding in Baker v. Ellis because they contend the plain and unambiguous wording of the first sentence of § 18-60-213 allows appellants to either peaceably improve land under color of title or peaceably improve land without color of title and be entitled to damages. Appellants cite Leathers *357 v. W.S. Compton Co., 316 Ark. 10, 870 S.W.2d 710 (1994), for this proposition. However, Leathers has no relation to § 18-60-213 and only stands for the proposition that, when the language of a statute is plain and unambiguous, we give the language its plain and ordinary meaning. 316 Ark. at 13, 870 S.W.2d 710. Even if we were so inclined, we have no authority to overrule a decision of the supreme court. Roark v. State, 46 Ark. App. 49, 876 S.W.2d 596 (1994). Because appellants did not make the improvements under color of title, they are not entitled to damages under § 18-60-213.
Furthermore, the chancellor noted that appellants' expert witness had testified that the improvements appellants made to the property were removable and, in his order, he gave appellants six months to remove their improvements. Appellants have not challenged this finding by the chancellor.
Affirmed.
PITTMAN and COOPER, JJ., agree.
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50 B.R. 984 (1985)
In re Glenn W. LARKINS, Pansy Larkins, Debtors.
Glenn W. LARKINS, Pansy Larkins, Appellants,
v.
COMMERCIAL BANK OF DAWSON, et al., Appellees.
No. 84-0241-0-J, Bankruptcy No. 4-84-154(D).
United States District Court, W.D. Kentucky, Owensboro Division.
February 14, 1985.
*985 Jeff S. Taylor, Gordon, Gordon & Craig, Owensboro, Ky., for appellants.
Hal C. Harned, Massamore & Harned, Madisonville, Ky., John Henriksen, Office of Gen. Counsel, Frankfort, Ky., Charles L. Lamar, Lovett & Lamar, Owensboro, Ky., for appellees.
MEMORANDUM OPINION
JOHNSTONE, District Judge.
This matter is before the court on appeal from the Bankruptcy Court's denial of confirmation of the debtor's proposed Chapter 13 plan. Jurisdiction over this suit exists under 28 U.S.C. § 1334(a), which provides that the district courts have jurisdiction of appeals from all final judgments of the bankruptcy courts.
The central issue before the court is whether a debtor may cure a mortgage default on his principal residence under a Chapter 13 plan pursuant to 11 U.S.C. §§ 1322(b)(2), (3) and (5), where the plan is filed after a foreclosure judgment has been obtained in state court, but prior to the actual foreclosure sale.
The debtors, Glenn and Pansy Larkins, gave the Commercial Bank of Dawson a promissory note and second mortgage on their principal residence to secure a loan. The maturity date of the note and mortgage was February 1, 1984. The debtors defaulted on the loan, and on April 27, 1983, the bank filed a foreclosure action in Hopkins Circuit Court which entered a judgment and order of sale in favor the the bank on May 2, 1984. On May 10, 1984, the debtors filed a Chapter 13 petition. The plan provided for payment of all the Larkins' debt over a sixty month period, including an $18,134 payment to the bank within seven months of confirmation of the plan.
The bankruptcy court denied confirmation of the debtors' plan ruling that since the mortgage had been reduced to foreclosure judgment, the entire amount of the loan was due and owing, and the proposed payment of the mortgage during the term of the plan would not constitute a reasonable time to cure the default as is required by 11 U.S.C. § 1322(b)(5). The court relied upon In re Coleman, 2 B.R. 348 (Bankr.W. D.Ky.1980), aff'd, 5 B.R. 813 (W.D.Ky. 1980). In that case, the bankruptcy court rejected the debtor's proposed plan finding that the amount due was the full amount of principal, interests, and costs because there had been a foreclosure judgment in state court. Under the circumstances presented, three years to cure the default was not a reasonable time under § 1322(b)(5). Id.
Judge Deitz noted that there were several recent cases that disagreed with the Coleman decision, but that he was bound by the law of this district. On this appeal, debtors argue that this court should follow those other cases, reverse the bankruptcy court, and allow them to cure their default and pay the amount due over the course of their proposed plan. The bank responds by contending that this case can be distinguished from that line of authority because it involves a debt that matured on its own, and that has been reduced to a foreclosure judgment in state court. Thus, Coleman applies, the entire amount is due, and sixty months is not a reasonable time to cure the *986 default. For the reasons set forth below, the court agrees with debtors' arguments and will reverse the bankruptcy court.
The curing of defaults in Chapter 13 cases is governed by 11 U.S.C. § 1322 which provides that:
(b) the plan may . . .
(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims;
(3) provide for the curing or waiving of any default; . . .
. . . .
(5) notwithstanding paragraph (2) of this Subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due;. . . .
11 U.S.C. § 1322(b)(2), (3), and (5).
Three circuit courts have recently interpreted this statute. In re Taddeo, 685 F.2d 24 (2d Cir.1982); Grubbs v. Houston First American Savings Association, 730 F.2d 236 (5th Cir.1984); and Matter of Clark, 738 F.2d 869 (7th Cir.1984). In Taddeo debtors defaulted on a long-term mortgage. The mortgagee accelerated the mortgage, declared its balance due immediately, and initiated foreclosure proceedings. Those proceedings were stayed when debtors filed a Chapter 13 petition. The bankruptcy court held that under § 1322(b), debtors could cure the default by paying the arrearages, and thereby reinstate the mortgage. The second circuit affirmed holding that "[w]hen Congress empowered Chapter 13 debtors to `cure defaults,' we think Congress intended to allow mortgagors to `deaccelerate' their mortgage and reinstate its original payment schedule." Taddeo, 685 F.2d at 27. It concluded that § 1322(b)(2) which prevents a plan from modifying a principal residence mortgage, does not preclude the curative measures contained in § 1322(b)(3). Modification of a claim refers to reduction in payments. Thus, curing a default and maintaining payments is not a modification of a claim. Id. at 28. "We believe that the power to `cure any default' granted in § 1322(b)(3) and (b)(5) is not limited by the ban against `modifying' home mortgages in § 1322(b)(2) because we do not read `curing defaults' under (b)(3) or `curing defaults and maintaining payments' under (b)(5) to be modifications of claims." Id. at 26-27.
The Fifth Circuit extended the Taddeo decision in Grubbs v. Houston First American Savings, 730 F.2d 236. That case involved a second mortgage on debtors' principal residence. Debtors defaulted and their creditor accelerated into maturity the full balance of the note. After a detailed analysis of the legislative history of § 1322(b), the court held that a home-mortgagor debtor is not barred either "(a) from curing a pre-petition acceleration into maturity of the unpaid installments due upon his home mortgage, or (b) from proposing . . . that all past due or matured amounts secured by his home mortgage be paid during the term of his plan, if approved by the court. . . ." Id. at 237. Thus, the court found that there was no "modification" of a claim where a Chapter 13 plan provided for payment over 36 months of past matured amounts. Id. at 238.
Finally, the Seventh Circuit has followed the Taddeo and Grubbs decisions, Matter of Clark, 738 F.2d 869 (6th Cir.1984), and held that under § 1322 a debtor is entitled to cure a default on a residential mortgage loan even though he filed a bankruptcy petition only after a state court had entered a judgment of foreclosure. Id. at 870. The court reasoned that the debtors maintained an interest in the property, despite the judgment, at the time that they filed the Chapter 13 petition. Id. at 871. Moreover, avoiding the state court judgment did not "modify" the creditor's claim. "Cure" and "modify" must have different meanings. Otherwise § 1322(b)(3) would be superfluous. "Cure" means to remedy the default, i.e., to pay all amounts due and owing. Id. at 872. "Modify" means to change the amount of the debt. Thus, there is no modification of the plan whereby debtors pay the arrearages over a 36 *987 month period and begin installment payments on the mortgage outside the plan.
Several other courts have held that a default can be cured, even after the mortgage has been brought to foreclosure judgment. In re Gwinn, 34 B.R. 936 (Bankr.S. D.Ohio 1983); In re Acevedo, 26 B.R. 994 (E.D.N.Y.1982); In re Mueller, 18 B.R. 851 (Bankr.W.D.Ark.1982); In re Young, 22 B.R. 620 (Bank.N.D.Ill.1982); In re Hubbard, 23 B.R. 671 (Bankr.S.D.Ohio 1982); See also In re Thompson, 17 B.R. 748 (Bankr.W.D.Mich.1982) (holding that a debtor may cure his default even after foreclosure sale, as long as the state redemption period has not expired). Those decisions emphasize the overriding rehabilitative purpose of Chapter 13, and note that that purpose is just as applicable to mortgages which have been reduced to judgment. Acevedo, 26 B.R. at 997. "Section 1322(b) should be used liberally due to the intent of Chapter 13 to foster debtor rehabilitation. Since Congress placed such great emphasis on the ability of the debtor to be rehabilitated, [these courts] permit the curing of accelerated mortgages despite the status of state law." Young, 22 B.R. at 622.
The case before the court falls squarely within the rules enunciated above. The bank argues that this case is distinguishable from that line of authority because the mortgage had naturally matured before the state court judgment was rendered and before the debtor's petition was filed. The court does not agree. The Grubbs decision speaks directly to mortgages that have matured. It makes no distinction between those that mature by acceleration and those that mature by the passage of time. In either case, § 1322 provides for payment of matured amounts during the term of the debtors' plan. The rationale for the rule is the same whether or not the mortgage matures naturally. It is in the best interest of debtors to allow a debtor to retain his home. "It is a significant motivating factor for the debtor to attempt to pay off his debts through Chapter 13 rather than discharge them through Chapter 7. The debtors maintain their self respect, the unsecured creditors receive a higher payoff, and the government benefits from a more stable tax base." In re Gwinn, 34 B.R. 936. In addition, "one of the primary purposes of Chapter 13 rehabilitation is to save homesteads." Young 22 B.R. at 622. It would certainly defeat that purpose to permit the bank to foreclose upon the Larkins because the loan happened to mature prior to the filing of the Chapter 13 petition.
Finally, the court notes that the bank's second home-lien encumbrance is not a long-term mortgage having its last payment to become "due after the date on which the final payment under the plan is due." § 1322(b)(5). Thus, the default in payment was curable under § 1322(b)(3). Grubbs, 730 F.2d at 247. Although the debtors' plan cannot modify the obligation, § 1322(b)(2), it can "provide for the payment from future income of previously non-accelerated matured amounts that had become due prior to the filing of the Chapter 13 petition, §§ 1322(a), 1327, 1328(a)." Id. at 247.
For these reasons, this court holds that neither § 1322(b), nor the state court foreclosure judgment, bars debtors' proposed plan which provides for payment of the matured amount due on the debt to the bank from the Larkins' future income over the life of the plan. Such a plan would not "modify" the home-mortgage indebtedness.
Accordingly, the court REVERSES the judgment of the bankruptcy court and REMANDS for consideration of the Larkins' Chapter 13 plan and of any other objections thereto if renewed by the creditor.
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IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-92-395-CV
HOWARD KAHMANN,
RELATOR
vs.
HONORABLE WILLIAM S. LOTT, JUDGE,
RESPONDENT
ORIGINAL PROCEEDING FROM WILLIAMSON COUNTY
PER CURIAM
Relator, Howard Kahmann, has filed a motion for leave to file petition for writ of
mandamus and tendered his petition. By his petition, relator seeks a writ of mandamus to compel
respondent, the Honorable William S. Lott, to order the preparation of a statement of facts at no
cost to relator in Williamson County cause number 92-003-K26, which is presently pending on
appeal in this Court as cause number 3-92-406-CR, styled Howard Bauder Kahmann, Jr.,
Appellant v. The State of Texas, Appellee.
Following his conviction in the above referenced cause, relator filed an affidavit
of indigence and moved for the preparation of a free statement of facts. Tex. R. App. P. 53(j).
The State challenged relator's claim of indigence. At a hearing on the motion, relator refused to
testify. The respondent recessed the hearing without making any finding concerning relator's
indigence. A transcription of the court reporter's notes from this hearing has been received by
this Court.
This Court may issue a writ of mandamus only to correct a clear abuse of discretion
or the violation of a duty imposed by law when there is no other adequate remedy at law. Walker
v. Packer,, 827 S.W.2d 833, 839 (Tex. 1992); Strake v. First Court of Appeals, 704 S.W.2d 746
(Tex. 1986). This Court may order the respondent to proceed to judgment but may not direct that
he enter a particular judgment for a certain party. Tex. State Bd. of Examiners in Optometry v.
Carp, 388 S.W.2d 409, 417 (Tex. 1965); Fulton v. Finch, 346 S.W.2d 823 (Tex. 1961).
Relator's motion for leave to file petition for writ of mandamus is granted and the
petition filed. We conditionally grant the writ of mandamus in part. Respondent, the Honorable
William S. Lott, is directed to make a written finding as to whether relator, Howard Kahmann,
is or is not presently indigent. If respondent finds that relator is presently indigent, he shall also
order the court reporter to prepare a statement of facts in Williamson County cause number 92-003-K26 at no cost to relator. This finding and order, if any, shall be filed in the record of that
cause no later than September 10, 1992. This Court assumes that respondent will comply with
our directive. If he fails to do so, a writ of mandamus will issue. All other relief requested in
relator's petition for writ of mandamus is denied.
[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]
Motion for Leave to File Petition for Writ of Mandamus Granted; Petition for Writ of
Mandamus Conditionally Granted in Part and Denied in Part
Filed: August 31, 1992
[Do Not Publish]
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Axelrod
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-92-166-CV
AXELROD R & D, INC. AND MICROWASTE NATIONAL CORPORATION,
APPELLANTS
vs.
FRANK T. IVY,
APPELLEE
FROM THE COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY,
NO. 209,735, HONORABLE J. DAVID PHILLIPS, JUDGE PRESIDING
The question presented in this appeal is whether Axelrod R & D, Inc. and
Microwaste National Corporation are entitled to a bill of review to set aside a default judgment.
The trial court denied the bill of review in a summary-judgment proceeding. We reverse the
judgment of the trial court and remand for further proceedings on the bill of review.
BACKGROUND
In October 1990, Frank Ivy brought suit against Axelrod R & D and Microwaste
to recover on a promissory note. Ivy served process on Richard Donelly, who is a board member
of Microwaste, but is not the president, vice president, or registered agent of either corporation.
Neither Axelrod R & D nor Microwaste filed an answer or appeared at trial, and on November
15, 1990, the trial court rendered default judgment against both corporations. In order to satisfy
the judgment, the Travis County constable executed on a patent owned by Burton Axelrod. The
constable set September 3, 1991, as the date for the sale of the patent.
On August 30, 1991, approximately nine months after the trial court rendered
default judgment against them, Axelrod R & D and Microwaste filed a petition for bill of review
and sought a restraining order to prevent the sale of the patent. The trial court granted the
temporary restraining order. The corporations then filed a motion for summary judgment on
November 12, 1991, requesting that the trial court declare the default judgment rendered in the
original suit null and void. Ivy filed a cross motion for summary judgment, urging the trial court
to uphold the default judgment because Axelrod R & D and Microwaste had not proved that they
were entitled to a bill of review. On December 19, 1991, the trial court rendered summary
judgment in favor of Ivy and denied summary judgment to Axelrod R & D and Microwaste, who
now appeal.
DISCUSSION
In their first two points of error, Axelrod R & D and Microwaste contend that the
trial court erred in granting Ivy's motion for summary judgment and denying their motion. They
assert that because they were not served with citation in the original suit, the trial court lacked
jurisdiction to render default judgment and the judgment is therefore void as a matter of law.
Alternatively, Axelrod R & D and Microwaste argue in their third point of error that the trial
court erred in granting summary judgment for Ivy because a fact issue exists as to whether
Axelrod R & D and Microwaste acted diligently in having the default judgment set aside.
Ivy concedes that because he served a person who is not the president, vice
president, or registered agent of either corporation, he failed to serve process on Axelrod R & D
and Microwaste in compliance with the Texas Business Corporations Act. See Tex. Bus. Corp.
Act Ann. art. 2.11 (1980) (specifying the method for serving corporations). He argues, however,
that Axelrod R & D and Microwaste had constructive notice of the litigation pending against them
and that they were fully aware of the subsequent default judgment because Donelly had advised
the corporations' president of both matters. Ivy asserts that this Court need not determine whether
the default judgment is void because Axelrod R & D and Microwaste failed to meet the
requirements of an equitable bill of review and the default judgment therefore is final.
We believe instead that the issue for this Court's consideration is the threshold
question of whether, within the context of a summary judgment proceeding, one of the parties has
proved or disproved as a matter of law that Axelrod R & D and Microwaste are entitled to an
equitable bill of review.
A. Bill of Review.
A bill of review is an independent equitable action to set aside a judgment that is
no longer appealable or subject to a motion for new trial. Transworld Fin. Serv. Corp. v. Briscoe,
722 S.W.2d 407, 407 (Tex. 1987); Baker v. Goldsmith, 582 S.W.2d 404, 406 (Tex. 1979).
Before a petitioner can invoke a bill of review, he ordinarily must plead and prove: (1) a
meritorious defense to the cause action alleged to support the judgment; (2) which the petitioner
was prevented from making by the fraud, accident, or wrongful act of the opposite party; (3)
unmixed with any fault or negligence on the petitioner's part. Id. at 406-407; Alexander v.
Hagedorn, 226 S.W.2d 996 (Tex. 1950).
The courts have relaxed these requirements in instances where the party petitioning
for the bill of review seeks to set aside a default judgment on the basis that he was not served with
process. Under that circumstance, the petitioner need not prove the requirement of fraud, accident
or wrongful act of the opposite party, Texas Indus., Inc. v. Sanchez, 525 S.W.2d 870 (Tex.
1975), or that he had a meritorious defense. See Peralta v. Heights Medical Center, Inc., 485
U.S. 88 (1988); Lopez v. Lopez, 757 S.W.2d 721, 723 (Tex. 1988).
Because Ivy concedes that he did not properly serve process on Axelrod R & D and
Microwaste, they are entitled to a bill of review if they can demonstrate that they were free from
fault or negligence in letting the judgment be taken. This requirement not only encompasses
whether a petitioner was negligent in allowing the trial court to render default judgment against
him, but also whether he exercised due diligence in availing himself of all legal remedies against
the former judgment. See Magan v. Hughes Tele. Network, Inc., 727 S.W.2d 104, 105 (Tex.
App. 1987, no writ); Carroll v. Carroll, 580 S.W.2d 410, 412 (Tex. Civ. App. 1979, no writ).
One who has neglected to pursue an alternative legal remedy such as a motion for new trial, an
appeal, or a writ of error is not entitled to seek equitable relief by way of bill of review. See Rizk
v. Mayad, 603 S.W.2d 773, 776 (Tex. 1980); National Bank v. First Nat'l Bank, 682 S.W.2d
366, 369 (Tex. App. 1984, no writ); Mackay v. Charles W. Sexton Co., 469 S.W.2d 441, 445
(Tex. Civ. App. 1971, no writ).
B. Summary Judgment.
We must now consider whether the trial court properly rendered summary judgment
denying Axelrod R & D and Microwaste a bill of review. In reviewing a summary judgment, this
Court must determine whether the movant has shown that there is no genuine issue of material fact
and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. Ann. 166a(c) (Supp. 1992);
Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548 (Tex. 1985). We take as true
all evidence favoring the non-movant and indulge every inference and every doubt in the non-movant's favor. Id. at 548-49. As noted, both parties moved for summary judgment in this
cause. Since the trial court rendered judgment in favor of Ivy, Ivy had the burden of proving as
a matter of law that Axelrod R & D and Microwaste were not entitled to a bill of review.
The summary-judgment evidence consists primarily of the affidavits of Richard
Donelly, Lydia Axelrod, and Burton Axelrod, who is the president of both Axelrod and
Microwaste. In these affidavits, the parties attempt to establish when Donelly contacted Burton
Axelrod with news of the pending lawsuit and the default judgment. Donelly and Burton Axelrod
agree that shortly after Ivy filed the lawsuit against Axelrod and Microwaste, Donelly informed
Burton Axelrod of the matter. However, the affidavits present conflicting evidence regarding
when Burton Axelrod learned that the trial court had rendered default judgment against Axelrod
R & D and Microwaste.
Axelrod R & D and Microwaste rely on Burton Axelrod's affidavit, in which he
states that he first learned of the default judgment in August 1991 when he received a copy of the
execution from the Travis County Constable's office. Donelly states in his affidavit that he
personally notified Burton Axelrod immediately upon learning that the trial court had rendered
judgment against Axelrod R & D and Microwaste. Thus, it is unclear from the record whether
Burton Axelrod had the opportunity to use a legal remedy other than this bill of review to set aside
the default judgment against Axelrod R & D and Microwaste.
Ivy argues that it is irrelevant that the record contains conflicting evidence about
whether Axelrod R & D and Microwaste acted diligently in seeking to have the default judgment
set aside. Instead, he argues that Axelrod R & D and Microwaste were negligent as a matter of
law because they had actual notice of the lawsuit and failed to respond. We disagree. In Wilson
v. Dunn, 800 S.W.2d 833, 836 (Tex. 1990), the Texas Supreme Court considered whether actual
notice to a defendant without proper service is sufficient to convey upon the court jurisdiction to
render default judgment. The court concluded that jurisdiction requires citation being issued and
served in a manner provided for by law, and that absent service, waiver, or citation, mere
knowledge of a pending suit does not place any duty on a defendant to act. Id. at 836-37. We
conclude from Wilson that Axelrod R & D and Microwaste cannot be negligent as a matter of law
for failing to act where they had no duty to do so.
The record presents an obvious fact issue regarding when Burton Axelrod learned
of the default judgment against these corporations. This issue goes directly to whether Axelrod
R & D and Microwaste met the essential bill-of-review element that they were "free from fault
or negligence." Negligence is a question for the jury when facts are such that the jury could draw
an inference either way. Lyons v. Paul, 321 S.W.2d 944, 950 (Tex. Civ. App. 1958, writ ref'd
n.r.e.). The trial court erred when it rendered summary judgment in this cause. Accordingly,
we sustain point of error number three.
Because we cannot determine whether Axelrod R & D and Microwaste are entitled
to a bill of review, we cannot reach the issue of whether the default judgment should be set aside.
Thus, we conclude that the third point of error is dispositive of the summary-judgment issues
presented in this cause.
C. Motion to Modify.
In a fourth point of error, Axelrod R & D and Microwaste contend that the trial
court erred in granting Ivy's motion to modify the judgment in this cause. That modification
changed the judgment to grant attorney's fees to Ivy in the event of an appeal.
A party has within thirty days of the time a judgment is signed to file a motion to
modify, correct, or reform the judgment. Tex. R. Civ. P. Ann. 329b(a) & (g) (Supp. 1992). The
district judge signed the judgment in this cause on December 19, 1991. Ivy filed his motion to
modify the judgment on January 27, 1992, and the trial court granted the motion. Thus, the trial
court granted a motion that was filed outside of the time allowed by rule 329b.
Ivy does not contest appellants' position regarding the effect of the motion to
modify. However, he counters that he is entitled to attorney's fees because the original default
judgment rendered in 1990 grants him $2,500 for each level of appeal. Ivy relies in part on
Rodriguez v. Holmstrom, 627 S.W.2d 198, 202 (Tex. Civ. App. 1981, no writ), in which this
Court considered whether attorney's fees are available to a defendant in a bill-of-review
proceeding if the default judgment in the underlying cause of action allocated attorney's fees for
subsequent appeals. This Court held that the term "appeal" as employed in a default judgment
necessarily encompassed consideration of that judgment by way of bill of review. Id. at 202-203.
We stress, however, that the question presented in this appeal is not whether Ivy
is entitled to attorney's fees under the terms of the original default judgment, but whether the trial
court correctly modified the judgment in the present cause. We conclude that the trial court erred
in granting a motion that was filed outside of the time allowed by rule 329b. Accordingly, we
sustain this point of error.
DISPOSITION
We reverse the judgment of the trial court and remand the cause for further
proceedings on the bill of review.
Jimmy Carroll, Chief Justice
[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]
Reversed and Remanded
Filed: August 26, 1992
[Publish]
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50 B.R. 801 (1985)
In re William Leroy LONES, Debtor.
The INDIANA NATIONAL BANK, Plaintiff,
v.
William Leroy LONES, Defendant.
Bankruptcy No. 3-84-00769, Adv. No. 3-84-0070.
United States Bankruptcy Court, W.D. Kentucky.
May 15, 1985.
F. Kenneth Conliffe, Louisville, Ky., for debtor-defendant.
John A. Majors, Louisville, Ky., for plaintiff-creditor.
MEMORANDUM-OPINION
G. WILLIAM BROWN, Bankruptcy Judge.
This matter is before the Court on the plaintiff's Complaint to determine the dischargeability of its debt under Section 523(a)(9) of the Bankruptcy Code.
The pertinent facts are not in dispute. On or about February 2, 1975, the debtor, William Leroy Lones, executed a promissory note to the plaintiff, Indiana National Bank, in the original amount of $20,557.44. This note was secured by a lien on a mobile home. On September 15, 1977, the defendant filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Western District of Kentucky, and listed his indebtedness to Indiana National Bank in the petition with a balance of $12,848.40. On or about October 31, 1977, the defendant executed a "Reaffirmation of Bankruptcy Agreement" with the plaintiff. Within several months of executing this agreement, the mobile home was repossessed by the plaintiff herein and sold. On February 18, 1981, Default Judgment in the amount of $7,726.81 was entered in the Jefferson Circuit Court against the defendant for the deficiency.
The debtor-defendant again filed a Chapter 7 petition on April 13, 1984 and listed therein, the plaintiff-creditor, Indiana National Bank, as an unsecured creditor. The creditor filed this adversary proceeding objecting to the discharge of this debt under 11 U.S.C. Section 523(a)(9).
The sole issue for determination by this Court is whether the debtor, by listing Indiana National Bank as a duly scheduled creditor in his previous bankruptcy and by reaffirming said indebtedness rather than allowing it to be discharged, forever waives discharge and is thus prohibited by 11 U.S.C. Section 523(a)(9) from obtaining a *802 discharge of the indebtedness in a subsequent bankruptcy. The plaintiff argues that by executing the "Reaffirmation Agreement" at the conclusion of his first bankruptcy proceeding, the debtor has waived discharge of this debt. The debtor argues that his reaffirmation is not equivalent to a waiver of discharge as contemplated by Section 523(a)(9).
11 U.S.C. § 523(a)(9) provides as follows:
A discharge under Section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt
(9) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under Section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under Section 14(c)(1), (2), (3), (4), (6), or (7) of such Act.
Section 727 of the Bankruptcy Code, which is the heart of the fresh start provisions, must also be consulted for resolution of this issue. That Section requires the Court to grant a debtor a discharge unless one of eight conditions is met. Section 727(a)(10) states that:
(a) The court shall grant the debtor a discharge, unless
(10) The court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter.
First, the Court notes that there is little case law confronting the issue of what constitutes a waiver of discharge. However, the Court believes that a resolution of this somewhat novel issue may be found by analyzing the applicable Bankruptcy Code provisions as they interrelate, as well as by examining the Congressional policy behind denial of discharge. Secondly, because exceptions to dischargeability substantially frustrate the fresh start objection and rehabilitative goal of the discharge provisions, these exceptions are to be construed strictly against creditors objections and liberally in favor of debtors. In re Vissers, 21 B.R. 638 (Bkrtcy.,E.D. Wisc.1982); In re French, 20 B.R. 155 (Bkrtcy.,D.Ore.1982). Further, the burden of proving that a debt comes within one of the statutory exceptions is upon the party opposing discharge of the debt. In re Magnusson, 14 B.R. 662 (Bkrtcy.,N.D.N.Y. 1981).
One of the main purposes of the Bankruptcy Act is to give debtors ". . . new opportunity in life and clear field for future effort, unhampered by pressure and discouragement of pre-existing debt . . .". Hanover National Bank v. Moyses, 186 U.S. 181, 22 S. Ct. 857, 46 L. Ed. 1113 (1902). Congress, by 11 U.S.C. Section 727(a)(8) has, in essence, given the debtor this "opportunity" once every six years. If this Court was to adopt the plaintiff's position of equating a reaffirmation agreement with a waiver of discharge, a debtor who reaffirms would be forever waiving any opportunity to bankrupt that debt. Such a result is contrary to Congressional intent as evidenced by Section 727 of the Bankruptcy Code. The interpretation of Section 523(a)(9) as urged by the plaintiff-creditor would subject unsophisticated debtors to a lifelong obligation for a debt which is in contravention of the general purposes of the Bankruptcy Code.
Furthermore, the exceptions to discharge as established by Congress in 11 U.S.C. Section 523 evidence a denial of discharge based on either public policy decisions (taxes, alimony, government guaranteed school loans), or denial to a debtor who approaches the bankruptcy court with "unclean hands", attempting to discharge an intentional wrong he has committed. Subsection (3) prohibits the discharge of a debt not listed. However, a debt that was not listed in a prior bankruptcy (absent some bad faith on the part of the debtor), can be discharged six years later by the filing of a subsequent petition. 11 U.S.C. Section 523(b); In re Lyons, 287 Fed. 602 (E.D.N.Y.1922). To interpret Section 523(a)(9) to apply to any and every reaffirmation is to impose on an "innocent" debtor the same sanctions that would apply to one who has committed a "wrongful" act against a creditor. Such result was not the intent of Congress nor does it promote the policy of *803 the statute. As stated by the Ninth Circuit Court of Appeals in In re Klapp, 706 F.2d 998, 1000 (9th Cir.1983):
By enacting Section 523(a)(9), Congress evinced an intent to deter the various sorts of debtor misconduct, such as dishonesty and uncooperativeness, that are described in Section 727(a) and listed in Section 523(a)(9). Denying discharge to debtors who were denied discharge in a prior proceeding for perpetrating such enumerated misdeeds is a deterrent within the policy of the statute.
This Court believes that the purpose of Section 523(a)(9) is to deter debtor misconduct, not to forever bar a debtor from discharging a debt in a subsequent bankruptcy proceeding, even after reaffirmation of the same. If discharge was denied in a prior bankruptcy on one of the grounds enumerated in Section 727 based on dishonesty or lack of cooperation, there is no reason for the debtor to be able to obtain a discharge later which would include these prior debts. "When, however, the reason has nothing to do with any act involving dishonest dealing with the creditors, the purpose of the statute is just to the contrary." Collier on Bankruptcy, paragraph 523.19, at page 523-156 (15th Ed. 1979).
The Court finds that Section 523(a)(9) does not deny subsequent discharge to a debtor who has reaffirmed. In Associates Financial Services Corp. v. Cowen, 29 B.R. 888 (Bkrtcy.,S.D.Ohio 1983), the Court implied that a properly reaffirmed debt can be subsequently discharged by stating that an improperly reaffirmed debt ". . . is not cognizable as `debt' in a subsequent proceeding." Associates, supra at 895.
Further, a review of Bankruptcy Rule 4004 which relates to discharge, indicates that it was not Congressional intent for a reaffirmation to be considered a waiver of discharge such as to deny discharge of the indebtedness in a subsequent bankruptcy proceeding. Bankruptcy Rule 4004(c) provides that:
In a Chapter 7 case, on expiration of the time fixed for filing a complaint objecting to discharge, the court shall forthwith grant the discharge unless (1) the debtor is not an individual, (2) a complaint objecting to the discharge has been filed, or (3) the debtor has filed a waiver under Section 727(a)(10) of the Code. Notwithstanding the foregoing, on motion of the debtor, the court may defer the entry of an order granting a discharge for 30 days and, on motion within such period, the court may defer entry of the order to a date certain. (Emphasis added).
The Advisory Committee Notes explain that:
The last sentence of subdivision (c) takes cognizance of Section 524(c) of the Code which authorizes a debtor to enter into enforceable reaffirmation agreements only prior to entry of the order of discharge. Immediate entry of that order after expiration of the time fixed for filing complaints objecting to discharge may render it more difficult for a debtor to settle pending litigation to determine the dischargeability of a debt and execute a reaffirmation agreement as part of a settlement.
If, in fact, Congress intended to equate a reaffirmation with a waiver of discharge, then the last sentence of Bankruptcy Rule 4004(c) would be totally unnecessary. It is clear that subsection (3) concerning a debtor who filed a waiver under Section 727(a)(10) contemplates something separate and apart from a reaffirmation under Section 524(c), or there would be no necessity to defer entry of an order granting a discharge for 30 days to permit a debtor to enter into a reaffirmation agreement.
For the foregoing reasons, this Court finds that the plaintiff herein has not met its burden of proving that its debt comes within the statutory exception of Section 523(a)(9), and therefore, this debtor has the right to discharge the debt due to the plaintiff-creditor herein, Indiana National Bank. An Order will be entered this date dismissing the plaintiff's complaint objecting to discharge.
The above constitutes Findings of Fact and Conclusions of Law pursuant to the Rules of Bankruptcy Procedure 7052.
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989 F. Supp. 353 (1997)
ENERGY CAPITAL AND SERVICES LP, II, Plaintiff,
v.
HILL REFRIGERATION, INC., a/k/a Hill Phoenix, Penpros Land, Inc., and Refrigeration Systems, Inc., Defendants.
Civil Action No. 97-11393-GAO.
United States District Court, D. Massachusetts.
December 17, 1997.
*354 Christopher W. Parker, Boston, MA, for Plaintiff.
Thomas N. O'Connor, David A. Wilson, Hale & Dorr, Boston, MA, for Defendants.
MEMORANDUM AND ORDER
O'TOOLE, District Judge.
The defendant, Penpros Land, Inc., f/k/a Hill Refrigeration, Inc. (Penpros/Hill), has moved to dismiss this action for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). For the following reasons, the motion is denied.
BACKGROUND
This case arises out of a contract ("Energy Services Agreement") between the plaintiff, Energy Capital and Services LP, II ("Energy Capital") and defendant Penpros/Hill. Energy Capital is a Massachusetts partnership with a principal place of business in Lowell, Massachusetts. Penpros/Hill is a Delaware Corporation which currently conducts no substantial business. However, during the formation and performance of the Energy Services Agreement, the company's principal places of business were New Jersey and Illinois. The agreement itself was negotiated between representatives of Hill and Energy Capital primarily in New Jersey, was executed in New Jersey, and contains a New Jersey choice-of-law provision. (Franklin Aff. ¶ 3.) The performance of the contract was to take place in New Jersey, where Energy Capital was to install energy conservation equipment and provide services on that equipment at a facility located in Trenton, New Jersey. (Franklin Aff. ¶ 4.) The term of the Energy Services Agreement was ten years. Energy Capital installed the equipment and performed services on that equipment from 1992 until January 1996.
From the inception of the Energy Services Agreement through January 1996, Penpros/Hill paid the amounts due under the contract on a monthly basis in Massachusetts. Throughout this period representatives of Penpros/Hill were in regular contact with representatives of Energy Capital in Massachusetts regarding the performance and administration of the agreement, the parties' respective obligations under the agreement, the payments of amounts due and owing, and maintenance of the energy services equipment. (Aronson Aff. ¶ 4.) Energy Capital proffers evidence that Penpros/Hill "routinely directed inquiries, sometimes on a daily basis," to Energy Capital's offices in Lowell, Massachusetts. (Aronson Aff. ¶ 9.)
Pursuant to a related agreement, the parties established an escrow account with Shawmut Bank in Worcester, Massachusetts. The escrow agreement provides that Energy Capital will pay into the escrow account a 10% rebate of the aggregate savings shown on a monthly report, prepared according to the original Energy Services Agreement. Penpros/Hill paid the fees associated with *355 the account, and is entitled to payments from this account. (Aronson Aff. ¶ 15.)
After the facility in Trenton was sold to a third party, Energy Capital initiated this action for breach of contract.
DISCUSSION
The exercise of specific personal jurisdiction over Penpros/Hill is proper if Energy Capital can satisfy two conditions: First, that the forum in which the federal district court sits has a long-arm statute that purports to grant jurisdiction over the defendant; and second, that the exercise of jurisdiction pursuant to that statute comports with requirements of the United States Constitution. See, e.g., Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 204 (1st Cir.1994).
The Massachusetts long-arm statute provides that "[a] court may exercise personal jurisdiction over a person ... arising from the person's ... transacting any business in this commonwealth." Mass. Gen. L. ch. 223A, § 3(a) (1996). A defendant need not be physically present in a state to "transact business" in the state. See, Good Hope Indus. v. Ryder Scott Co., 378 Mass. 1, 389 N.E.2d 76, 82 (1979); Buctouche Fish Market, Ltd. v. City Sea Foods, Inc., 735 F. Supp. 441, 442 (D.Mass.1990). However, the mere fact that a company in Massachusetts executes a contract with an entity in another state does not automatically mean that the foreign state "transacted business" within the meaning of the statute. The Ivey Companies v. Enterprise Care Facilities, No. 96-10749-GAO, slip. op. at 6 (D.Mass. Jan. 17, 1997). See also, A-Connoisseur Transp. Corp. v. Celebrity Coach, Inc., 742 F. Supp. 39, 43 (D.Mass.1990) (citing Ganis Corp. of Cal. v. Jackson, 822 F.2d 194, 197 (1st Cir. 1987).)
When a claim arises from a breach of contract, a finding of jurisdiction under this provision requires an "evaluation of the relations between the parties, their respective activities under the contract, and the linkages, if any, between the defendant's participation in the transaction and Commonwealth of Massachusetts." Telco Communications, Inc. v. New Jersey State Firemen's Mut. Benevolent Ass'n, 41 Mass.App.Ct. 225, 669 N.E.2d 781, 784 (1996). The court must "look at all of the communications and transactions between the parties, before, during and after the consummation of the contract, to determine the degree and type of contacts the defendant has with the forum, apart from the contract alone." Ganis Corp., 822 F.2d at 197-98.
Here, the parties entered into a contract that contemplated a ten-year relationship. Throughout the first four years of the performance of the contract, defendants routinely directed communications into Massachusetts. In addition, the parties set up an escrow account in a bank in Massachusetts. The existence of the bank account and the purposeful direction of communications into Massachusetts are sufficient to amount to "transacting business" within the meaning of the statute. See, e.g., Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 389 N.E.2d 76 (1979) (where foreign corporation sent periodic appraisal reports to Massachusetts, frequently initiated telephone communications to Massachusetts, mailed monthly invoices to Massachusetts and regularly accepted payment by check from Massachusetts bank account, such activity was sufficient to constitute "transacting business" within the meaning of the Massachusetts long-arm statute).
This activity is also sufficient to constitute constitutionally acceptable "minimum contacts." See World-Wide Volkswagen v. Woodson, 100 S. Ct. 559, 444 U.S. 286, 62 L. Ed. 2d 490 (1980); International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). The contract between Energy Capital and Penpros/Hill created "`continuing obligations' between [the defendant] and residents of the forum," such that the defendant "purposefully availed" itself of the opportunity of doing business in Massachusetts. Burger King v. Rudzewicz, 471 U.S. 462, 476, 105 S. Ct. 2174, 2184, 85 L. Ed. 2d 528 (1985)
Once a defendant has been found to have made "minimum contacts" and to have purposefully directed himself towards the forum state, exercise of personal jurisdiction will be *356 constitutionally permissible unless the defendant presents a "compelling case" that the exercise of personal jurisdiction will offend notions of "fair play and substantial justice." See Burger King, 471 U.S. at 477-78, 105 S.Ct. at 2184-85; International Shoe, 326 U.S. at 320, 66 S.Ct. at 160. Defendants have offered no such proof, and, especially considering that the defendant is no longer an on-going business in any forum, adjudication of the dispute here is as fair as it would be anywhere.
CONCLUSION
For the foregoing reasons, defendants motion to dismiss for lack of jurisdiction is DENIED.
SO ORDERED
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719 A.2d 724 (1998)
316 N.J. Super. 144
Roxanne COOK, Plaintiff,
v.
FIRST MORRIS BANK, Defendant.
Superior Court of New Jersey, Law Division, Morris County.
Decided July 17, 1998.
*725 Peter L. Skolnik, Roseland, for Courtroom Television Network (Lowenstein Sandler, P.C., attorneys).
Walter Lucas, West Orange, for plaintiff (Lucas, Savits and Marose, L.L.C., attorneys).
Arthur L. Raynes, Morristown, for defendant (Wiley, Malehorn and Sirota, attorneys).
VILLANUEVA, J.A.D. (retired and temporarily assigned on recall).
This is an application by Courtroom Television Network ("Court TV"), a national cable news channel, for permission under Canon 3A(9) of the New Jersey Code of Judicial Conduct to televise the trial of this civil case. This written opinion supplements the oral opinion previously rendered.
Plaintiff, Roxanne Cook was employed by defendant, First Morris Bank for eight and one-half years as a branch manager. On May 6, 1996, plaintiff was advised by Ralph Riccioni, President of First Morris Bank ("the bank"), that she was an "at will" employee and that she was terminated. Less than two months earlier, plaintiff announced she was pregnant as a result of having been artificially inseminated by her brother-in-law so that she could be a surrogate mother for her younger sister who had been unable to conceive in nine years of marriage and had been diagnosed with breast cancer.
*726 In her complaint, plaintiff contends that this termination was "pregnancy discrimination" in violation of the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to -40. The other two counts of plaintiff's complaint against the bank, which have been dismissed, involved an alleged common law invasion of privacy, and a constitutional violation of plaintiff's right to privacy. The bank defended the complaint and seeks attorneys fees under N.J.S.A. 10:5-27.1 on the grounds that the plaintiff's complaint has been brought in bad faith.
The bank's answer alleges that plaintiff's termination from the bank resulted from a series of actions and explanations for such actions that gave rise to substantial questions about her honesty, integrity and trustworthiness. Three instances involved missing cash that was either never recovered or found in plaintiff's possession or on her person. The fourth incident involved plaintiff's claim that her recently appraised diamond engagement ring was "stolen" while at work. The investigating detective from the local police department was skeptical of plaintiff's story regarding the ring because in his professional judgment it sounded "rehearsed" and she had been involved in two prior incidents where her rings were allegedly "stolen." Plaintiff's insurance carrier also expressed skepticism. Bank personnel were also aware of plaintiff's prior instances where her rings were "stolen."
In its counterclaim,[1] the bank alleged that the plaintiff spoke with a news reporter and caused a segment of an NBC television program to be broadcast on its "News Channel 4 at 11" program during which plaintiff and/or her agent allegedly made slanderous remarks regarding the bank. The bank also alleged that plaintiff or her agent spoke to a representative from The Star-Ledger regarding her termination of employment and made slanderous remarks about the bank. These remarks were reported in The Star-Ledger on October 7, 1996.
The only objection to Court TV's application has been made by the bank who contends that to allow television cameras to broadcast the trial presents plaintiff with a wide forum for the false and damaging accusations which would only cause further damage to its reputation. The bank also argues that thrusting this litigation into the sensational programming of Court TV would be unfair to the bank and the two-year old healthy boy to whom the plaintiff gave birth, bringing undue notoriety onto the child.
The bank asserts that this court should appoint a guardian ad litem pursuant to R. 4:26-2(b) to protect the boy. The bank has no standing to compel such an appointment. The boy is not a trial "participant" under the Supreme Court Guidelines, but nevertheless this court could, in its discretion, R. 4:26-2(b)(4), appoint a guardian ad litem but there is no reason to do so.
The facts surrounding the circumstances of the infant's birth have been and will be promulgated by the print media, and plaintiff's attorney represented that the family intends to inform the child about those circumstances in any event.
The bank, on its own behalf and purportedly for the benefit of the young boy, insists that the order permitting live television be conditioned upon a prohibition of rebroadcasting the television of this trial in future years. Court TV's attorney represented that it was "unlikely" that the trial would be rebroadcast in the near future, and even less likely that it would be rebroadcast several years from now. However, the Supreme Court Guidelines make no mention of regulating the schedule by which the media may broadcast New Jersey trials, or of conditioning permission to televise trials upon an agreement by the media to restrict rebroadcasts.
The Guidelines' omission of any regulation on this issue is apparently deliberate since to do so would raise serious concerns under the First Amendment of the United States Constitution and the New Jersey Constitution. If the media has the right to broadcast a trial under the Guidelines as a *727 surrogate for the public's right of access, as Court TV does here, the First Amendment would prohibit courts from dictating to the media when it may broadcast, just as courts may not tell newspapers when they may publish. See generally Nebraska Press Ass'n. v. Stuart, 427 U.S. 539, 96 S.Ct. 2791, 49 L.Ed.2d 683 (1976). Absent some compelling circumstances not present here, such a restriction would constitute an improper interference with the First Amendment right of the media to exercise its own journalistic judgment about how best to serve the needs of its audience.
Plaintiff's sister, who has adopted the child, does not object but has requested that her face not be shown. Court TV has acceded to this request.
The Court finds that televising these proceedings is permitted by Supreme Court policy and guidelines in accordance with general court policy, and the defendant has not presented any valid objection. This policy is in accord with the common law presumption of public access to court proceedings and court records, See Nixon v. Warner Communications, Inc., 435 U.S. 589, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978). New Jersey courts have for many years had a "strong and consistent policy in favor of open judicial proceedings." State v. Williams, 93 N.J. 39, 56, 459 A.2d 641 (1983); see also R. 1:2-1.
After an experimental period, the New Jersey Supreme Court permitted statewide still and television camera and audio coverage of proceedings in the courts of New Jersey, which have been in effect since September 1986. There are only a few exceptions contained in Guideline 10(b) of the Supreme Court Guidelines for Still and Television Camera and Audio Coverage of Proceedings in the Courts of New Jersey. They involve:
proceedings in juvenile court or trial courts involving custody of children, divorce or matrimonial disputes, trade secrets and charges of sexual penetration or attempts thereof when the victim is alive, except that, when the victim is deceased, the court may deny permission in consideration of the victim's survivors or analogous concerns. Television, radio or still photographic coverage may be excluded in any proceeding where such coverage would cause a substantial increase in the threat of or the potential for harm to a participant in the case or would otherwise interfere with the achievement of a fair proceeding. Coverage of domestic disputes in the municipal courts is prohibited.
This case does not fit within any of those exceptions.
Guideline No. 11 also provides that "permission for coverage shall not be conditioned upon obtaining consent of any party or party's attorney or any witness or any participant in such a trial or Appellate argument." The Supreme Court in Williams pointed out: "This strong judicial and public policy of openness is also reflected in this Court's guidelines regulating electronic and photographic coverage of the courtroom." State v. Williams, supra, 93 N.J. at 56 n. 6, 459 A.2d 641.
"In January 1981, the United States Supreme Court held that such media coverage over the objection of a defendant did not constitute a deprivation of his constitutional rights in the absence of a showing of actual prejudice. See Chandler v. Florida, 449 U.S. 560, 101 S.Ct. 802, 66 L.Ed.2d 740 (1981). And see State v. Newsome, 177 N.J.Super. 221, 229, 426 A.2d 68 (App.Div.1980), similarly holding and presaging Chandler by several weeks." Pressler, Current N.J. Court Rules, comment 2 on R. 1:2-1 (1998).
Court TV provides extended television coverage of judicial proceedings. Attorneys and law professor commentators explain the law and procedural matters relating to the case. Its goal is to televise court proceedings in a balanced and dignified manner. In general, the function of Court TV, other than as a private business to make a profit, is to permit the public to gain some insight into the judicial system, how it works or how it does not work and thereby inform the public regarding an important part of government.
The Court understands the bank's concern regarding the effect this case may have on its business and its customers' confidence. That concern, however, must give way to the overall policy of open court proceedings in this State. It would be easy to find reasons for *728 secrecy in many cases. Almost all court cases are embarrassing in some way or another to somebody. If this policy of openness is undermined and open courtroom television is prohibited in favor of a policy of secrecy, before long a policy of openness would become a policy of secrecy. Nothing is more inimical to the values of a democracy than secrecy in any part of government, and the judiciary is an important part of government. Experience teaches that secrecy breeds distrust and nothing can be more pernicious to a democracy than when the citizens do not trust their own government.
The concerns of litigants must give way to the policy of openness in the judicial system, in our democratic tradition and as enshrined in the United States Constitution.
The application of Court TV is therefore granted conditioned upon their complying with the New Jersey Supreme Court Guidelines and agreeing not to display the face of plaintiff's sister.
NOTES
[1] First Morris Bank and Ralph Riccioni filed a counterclaim for defamation which was voluntarily dismissed shortly before trial.
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719 A.2d 799 (1998)
Michael J. PETRASOVITS, Appellee,
v.
Laurence I. KLEINER, M.D., Richard M. Katz, M.D., Richard M. Katz, Joseph E. Scogna, Neurosurgical Associates, Albert Einstein Medical Centers, Appellants.
Michael J. PETRASOVITS, Appellee,
v.
Laurence I. KLEINER, M.D., Appellant.
Superior Court of Pennsylvania.
Argued September 16, 1998.
Filed October 28, 1998.
*801 Rebecca D. Ward, Philadelphia, for appellants.
J. Craig Currie, Philadelphia, for appellee.
*802 Before KELLY, EAKIN and OLSZEWSKI, JJ.
*800 OLSZEWSKI, Judge:
In November 1988, appellee Michael J. Petrasovits suffered a work-related back injury while employed as a hospital orderly. After 16 months of physical therapy and rehabilitative treatment, appellee consulted appellant Dr. Laurence I. Kleiner, a neurosurgeon. Appellant recommended and performed back surgery on appellee, who claimed that his condition worsened as a result of that surgery. Appellee's medical malpractice suit based liability on three theories: (1) negligent performance of surgery; (2) lack of informed consent; and (3) negligence in recommending surgery. The court granted nonsuit on the theory of negligent performance and the jury rejected the lack of informed consent theory. The jury, however, found appellant liable in malpractice for recommending back surgery to appellee. The jury awarded appellee $908,000.00.[1]
Appellant filed post-trial motions seeking judgment n.o.v., a new trial, or remittitur. The court's order dated September 30, 1997, entered judgment on the jury verdict and denied appellant's motion for judgment n.o.v. The court subsequently entered another order on November 18, 1997, which amended the September order and denied appellant's remaining post-trial motions. Appellant filed this timely appeal.
Based on the "two schools of thought" doctrine, appellant requests judgment n.o.v. or, in the alternative, a new trial because the verdict was against the weight of the evidence. Additionally, appellant seeks a new trial based on alleged trial court error in: (1) excluding notes written by medical personnel; (2) prohibiting cross-examination of appellee's medical expert about suspension from a professional association for rendering improper testimony in a previous case; (3) allowing appellee's expert to testify beyond the fair scope of his pretrial report; and (4) improperly instructing the jury on the "two schools of thought" doctrine. Further, appellant requests remittitur or a new trial because the verdict was excessive.
"TWO SCHOOLS OF THOUGHT" DOCTRINE
Appellant first contends that he is entitled to judgment n.o.v., or in the alternative, to a new trial based on the "two schools of thought" doctrine. In Jones v. Chidester, 531 Pa. 31, 610 A.2d 964 (1992), our Supreme Court held that the "two schools of thought doctrine" is a defense to malpractice because "a physician will not be held responsible if in the exercise of his judgment he followed a course of treatment advocated by a considerable number of recognized and respected professionals in his given area of expertise." Id. at 969. Appellant argues that appellee's own medical expert admitted that a considerable number of respected neurosurgeons would have found appellee a suitable candidate for surgery and, therefore, pursuant to the "two schools of thought" doctrine defense, appellant could not be found liable for recommending surgery. Thus, appellant asserts that he is entitled to judgment n.o.v. In his alternative argument, appellant claims that the vast weight of the evidence showed that a considerable number of respected neurosurgeons would have recommended the surgery to appellee, thus protecting appellant from liability under the "two schools of thought" doctrine. Alleging that the verdict was against the weight of the evidence, appellant seeks a new trial.
A. JUDGMENT N.O.V.
As we stated in Neal by Neal v. Lu, 365 Pa.Super. 464, 530 A.2d 103, 110 (1987), "[t]he entry of judgment notwithstanding a jury verdict to the contrary is a drastic remedy. A court cannot lightly ignore the findings of a duly-selected jury." Consequently, we employ the following standard of review where a trial court denies a motion for judgment n.o.v.:
"[T]he evidence must be considered in the light most favorable to the verdict winner, and he [or she] must be given the benefit of every reasonable inference of fact arising therefrom, and any conflict in the evidence must be resolved in his [or her] *803 favor." We should not reach a decision based on how we would have voted but on the facts as presented in light of the jury's determinations. A judgment n.o.v. is proper if the movant is entitled to judgment as a matter of law or if the evidence was such that no two reasonable minds could disagree that the verdict was improper.
Struble v. Valley Forge Military Academy, 445 Pa.Super. 224, 665 A.2d 4, 6 (1995) (quoting Moure v. Raeuchle, 529 Pa. 394, 604 A.2d 1003, 1007 (1992)) (citations omitted).
Appellant claims that under the "two schools of thought" doctrine he is entitled to judgment n.o.v. because appellee's own medical expert admitted that a considerable number of respected neurosurgeons would have found appellee a suitable candidate for surgery. Despite appellant's attempts to manipulate Dr. Austin's trial testimony to support his argument, our review of the evidence finds that appellee's medical expert never made such an admission. Appellant highlights testimony from Dr. Austin wherein the medical expert agreed that a number of respected doctors in the field would recommend surgery to a patient who had radicular type pains all the way up to the day of surgery and who had at least one radiographic study indicating nerve root displacement. Dr. Austin, however, stated that there was no hard evidence that appellee had radicular type pain, as premised in counsel's hypothetical. Additionally, Dr. Austin testified that a reasonable group of respected neurosurgeons would not have offered surgery to a patient such as appellee. Therefore, there was evidence presented by appellee that the "two schools of thought" doctrine was not a viable defense for appellant. Thus, appellant was not entitled to the judgment n.o.v. as a matter of law.
B. WEIGHT OF EVIDENCE
Alternatively, appellant requests a new trial because the verdict was against the weight of the evidence. Appellant argues that the vast weight of the evidence presented supports his "two schools of thought" defense, thus entitling him to a new trial.
A party is entitled to a new trial based on the weight of the evidence
"only where the verdict is so contrary to the evidence as to shock one's sense of justice and the award of a new trial is imperative so that right may be given another opportunity to prevail.... [The appellant] is not entitled to a new trial where the evidence is conflicting and the [finder of fact] could have decided either way."
Watson v. American Home Assurance Co., 454 Pa.Super. 293, 685 A.2d 194, 198 (1996) (quoting Gottfried v. American Can Co., 339 Pa.Super. 403, 489 A.2d 222, 225 (1985)), app. denied, 549 Pa. 704, 700 A.2d 443 (1997).
In the instant case, there was evidence that respected neurosurgeons would not have recommended surgery to appellee. Appellant's ability to present opposing evidence does not entitle him to a new trial. It is within the jury's province to choose which evidence to accept and which evidence to reject. Furthermore, our sense of justice is not shocked by the jury's verdict.
EXCLUSION OF LETTERS WRITTEN BY NURSE LYNCH
Next, appellant argues that the trial court erred in excluding notes written by Nurse Lynch.[2] Appellant wished to introduce these notes as prior inconsistent statements in order to impeach appellee's credibility. Specifically, appellant asserts that these statements contradicted appellee's testimony that appellant was the first to discuss surgery with appellee.
Appellant sought to admit notes written by Nurse Lynch that purportedly set forth statements made by appellee. In order to be admissible, both the underlying statements by appellee and Nurse Lynch's notes themselves must be admissible. See Commonwealth v. Mescall, 405 Pa.Super. 326, 592 A.2d 687, 690 (1991). The statements by *804 appellee would be admissible. Nurse Lynch's notes, however, were not admissible. Although appellee stipulated that the notes were in fact written by Nurse Lynch, appellant made no attempt to qualify these notes as business records or show they met any other exception to the rule against hearsay. Thus, the trial court properly excluded this evidence.
CROSS-EXAMINATION OF DR. AUSTIN
Appellant alleges trial court error in prohibiting the cross-examination of appellee's expert regarding his suspension from the American Association of Neurological Surgeons for giving improper testimony in another case. Appellant argues that this evidence was relevant and admissible to impeach the credibility of Dr. Austin.
Generally, in Pennsylvania a witness may not be impeached through evidence of specific instances of conduct which have not resulted in a conviction. See Commonwealth v. Fried, 382 Pa.Super. 156, 555 A.2d 119, 123 (1989). A witness's credibility may be impeached, however, through evidence of reputation for untruthfulness. Commonwealth v. Peer, 454 Pa.Super. 109, 684 A.2d 1077, 1083 (1996).
Here, appellant wished to impeach Dr. Austin's credibility by using a specific instance of conduct that has not resulted in a conviction. This was an improper method of impeaching Dr. Austin's credibility. Thus, introduction of this evidence was properly excluded.
TESTIMONY BEYOND FAIR SCOPE OF EXPERT REPORT
Appellant alleges that appellee's medical expert, Dr. Austin, was permitted to testify beyond the fair scope of his pretrial report during the following exchange on direct examination:
Q: When a surgeon operates on the low back and finds evidence of nerve root impingement, is it customary for the surgeon to make a note of that in the operative note?
A: Yes.
Appellant claims that this testimony regarding operative notes was not part of Dr. Austin's pretrial report and should therefore have been excluded. Appellant contends that this testimony prejudiced him in that "[w]ithout advance notice that an attempt would be made to criticize the operative note as part of the expert's presentation, [appellant] was unable to present testimony to counter his opinion." Appellant's brief, at 42.
Admission of expert testimony is within the trial court's sound discretion and we will not disturb that decision without a showing of manifest abuse of discretion. Walsh v. Kubiak, 443 Pa.Super. 284, 661 A.2d 416, 419 (1995) (en banc). An expert's testimony on direct examination is to be limited to the fair scope of the expert's pre-trial report. Id.; Pa.R.Civ.P. 4003.5. In applying the fair scope rule, we focus on the word "fair." Jones v. Constantino, 429 Pa.Super. 73, 631 A.2d 1289, 1294-95 (1993) (quoting Dible v. Vagley, 417 Pa.Super. 302, 612 A.2d 493, 499 (1992)). Departure from the expert's report becomes a concern if the trial testimony "would prevent the adversary from preparing a meaningful response, or which would mislead the adversary as to the nature of the response." Id. Therefore, the opposing party must be prejudiced as a result of the testimony going beyond the fair scope of the expert's report before admission of the testimony is considered reversible error. Id. 631 A.2d at 1295. We will not find error in the admission of testimony that the opposing party had notice of or was not prejudiced by. See Boyce v. St. Paul Property & Liability, 421 Pa.Super. 582, 618 A.2d 962, 968 (1992) (finding no abuse of discretion in permitting testimony that expert testified to during pre-trial depositions as opposing party was on notice).
The implication of the testimony to which appellant complains is that appellant made no notation in the operative note of nerve root impingement because he saw no evidence of it during surgery. Appellant himself testified that he found no evidence of nerve root impingement during surgery. Thus, there was no prejudice to appellant by the admission of Dr. Austin's testimony.
*805 JURY INSTRUCTION
Appellant next contends that the trial court erred in its jury charge regarding the "two schools of thought" doctrine. Appellant alleges that the charge was confusing and misleading. Appellant bases this allegation on the clarification questions posed by the jury on this issue and the court's recharge and curative instruction. Appellant claims prejudice because this doctrine was central to his defense.
When reviewing a claim of error in the trial court's jury charge, we
determine whether the trial court committed clear abuse of discretion or error of law controlling the outcome of the case. Error in a charge is sufficient ground for a new trial, if the charge as a whole is inadequate or not clear or has a tendency to mislead or confuse rather than clarify a material issue. A charge will be found adequate unless "the issues are not made clear to the jury or the jury was palpably misled by what the trial judge said or unless there is an omission in the charge which amounts to fundamental error." A reviewing court will not grant a new trial on the ground of inadequacy of the charge unless there is a prejudicial omission of something basic or fundamental.
Stewart v. Motts, 539 Pa. 596, 654 A.2d 535, 540 (1995) (citations omitted).
The trial court originally instructed the jury as follows:
You've heard some evidence regarding existence of two reasonable and respected bodies of medical opinion. I believe counsel argued about two schools of thought. If there are two respected ways of performing a medical procedure or not performing a medical procedure exists in the medical community and both have validity and are recognized generally by medical specialists, say, in the field of neurosurgery, that either choice is an acceptable choice. It's not a question of whether they'd be equally acceptable. As long as there is a sufficient reasonable body of people who believe one way as opposed to the other way.
Because a physician chooses one school of thought as opposed to another and the result comes out not good, that doesn't mean there's liability.
Jury Charge, 7/29/96, at 29-30.
After appellee objected to the exclusion of one of his submitted points, the judge added:
One thing I forgot to instruct you which I intended to do is that you cannot consider Doctor Stein's opinion that the plaintiff was a candidate or suitable candidate for surgery, nor Doctor Scogna's opinion, the second opinion after Doctor Kleiner had recommended surgery. You cannot use Doctor Scogna nor Doctor Stein's opinions in determining whether or not Doctor Kleiner was negligent in recommending surgery. This is his decision, and you decide the case based upon his decision, not somebody else's decision in a case such as this.
Id. at 42.
A request for clarification was received from the jury that read:
"Is Doctor Kleiner required to adhere to his professed standard of care as given by his testimony, or can that be disregarded as as [sic] long as as [sic] his actions fall in line with what a respected number of neurosurgeons might have done?"
Id. at 59.
Presuming that the jury wanted clarification of the "two schools of thought" doctrine, the court restated the instruction for the jury.
A physician has the right to practice his or her profession in accordance with any body of medical opinion which is supported by reasonable and respected opinion.
Where competent medical authority is divided, meaning there are two separate respected opinions on how to do things, a physician will not be liable to a plaintiff if in the exercise of his or her judgment he or she follows a course of treatment supported by a considerable number of reputable and respected neurosurgeons.
If you find that Doctor Kleiner in his treatment is supported by such reasonable and respected medical opinion, then you must find in his favor against the plaintiff *806 with regard to the issue of whether or not the plaintiff was a proper candidate for surgery.
A physician may rightfully choose to practice his or her profession in accordance with a school of thought which differs in its concepts and procedures from another school of thought. Even though the school that he follows is a minority one, he will still not be deemed to be negligent or practicing improperly so long as it is advocated by a considerable number of reasonable medical experts.
This does not mean that you are to consider the opinions of Doctor Stein. Remember, Doctor Stein rendered an opinion months and months before, up until about five months before Doctor Kleiner treated the plaintiff. So, really, Doctor Stein's opinion is not to be considered in any way by you in determining whether or not he is part of an accepted school of thought. That's to be totally disregarded in so far as deciding this part of the question.
Furthermore, you're not to consider any inference you may draw or you shouldn't make any inference from the fact that Doctor Scogna on behalf of the insurance carrier approved of the surgery. He wasn't here to testify. He wasn't deposed through deposition. He wasn't cross-examined. So totally ignore whatever inference you might draw from the fact that he approved of the surgery.
Jury Charge, 7/29/96, at 71-73.
This clarification fairly, accurately, and adequately instructed the jury on the applicable law. This instruction did not mislead or omit any material point on the "two schools of thought" doctrine. Thus, there was no error in the jury instruction to warrant the granting of a new trial.
EXCESSIVE VERDICT
Finally, appellant asserts that he is entitled to remittitur because the $908,000.00 award, solely for pain and suffering, is grossly excessive. As appellant points out, appellee suffered from a back injury prior to having the surgery. Thus, any award for appellee would be limited to the additional damage caused by the surgery. Appellant describes appellee's life after the initial back injury, but prior to the surgery, as involving limited abilities to fully participate in activities, discomfort, and depression. Appellant contends that appellee's life following the surgery is not much different than life prior to the surgery and therefore the award of $908,000.00 was excessive for the slight increase in pain and suffering caused by the surgery.
It is within the discretion of the trial court to grant a new trial because the verdict is excessive. Botek v. Mine Safety Appliance Corp., 531 Pa. 160, 611 A.2d 1174, 1176 (1992). We will not disturb the trial court's refusal to grant a new trial on the grounds that the verdict is excessive unless the court clearly abused that discretion. Id. In Harding v. Consolidated Rail Corp., 423 Pa.Super. 208, 620 A.2d 1185 (1993), we stated:
In determining whether a verdict is excessive a court may consider the following factors: (1) the severity of the injury; (2) whether the injury is manifested by objective physical evidence or whether it is only revealed by the subjective testimony; (3) whether the injury is permanent; (4) whether the plaintiff can continue with his or her employment; (5) the size of out-of-pocket expenses; (6)[t]he amount of compensation demanded in the original complaint. However, as each case is unique, the court should apply only those factors which are relevant to that particular case before determining if that verdict is excessive.
Id. at 1193 (citations omitted).
Evidence elicited at trial belies appellant's assertion that appellee's pain and suffering was only slightly increased as a result of the surgery. Among other problems, appellee suffers increased pain and can no longer enjoy activities that he was able to participate in prior to the surgery. Appellee now takes a considerable amount of medication that affects his ability to concentrate and has had to change his career plans. Further, appellee is withdrawn from friends and family unlike before and is now so severely depressed as to contemplate suicide.
*807 The evidence adduced at trial clearly supports a substantial increase in appellee's pain and suffering after the surgery. Given the factors relevant to this case, the evidence supported the jury's award. Thus, the trial court did not abuse its discretion in refusing to grant a new trial based on an excessive verdict.
CONCLUSION
For the foregoing reasons, appellant is not entitled to judgment n.o.v., a new trial, or remittitur. Orders affirmed.
NOTES
[1] This award was molded to $1,154,067.98 in order to include delay damages.
[2] Appellant also complains of the exclusion of notations made by Dr. Stein and Dr. Band in medical records. Appellant made no attempt to admit these notes into evidence. Furthermore, these notes would also be inadmissible for the same reasons set forth regarding Nurse Lynch's notes.
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989 F. Supp. 1131 (1997)
IN RE INDEPENDENT SERVICE ORGANIZATIONS ANTITRUST LITIGATION.
Civil Action No. MDL-1021.
United States District Court, D. Kansas.
December 22, 1997.
*1132 P. John Owen, Morrison & Hecker L.L.P., Kansas City, MO, Eric D. Braverman, Employers Reinsurance Corporation, Overland Park, KS, Lori R. Schultz, Morrison & Hecker L.L.P., Kansas City, MO, for CSU, L.L.C.
Peter K. Bleakley, Arnold & Porter, Washington, DC, Peter W. Marshall, Xerox Corporation, Stamford, CT, Michael G. Norris, Norris, Keplinger & Logan, L.L.C., Overland Park, KS, C. Larry O'Rourke, E. Robert Yoches, Vincent P. Kovalick, Leslie I. Bookoff, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, for Xerox Corporation.
MEMORANDUM AND ORDER
EARL E. O'CONNOR, Senior District Judge.
This matter is before the court on the motion of CSU, L.L.C. ("CSU") for reconsideration of the court's April 8 and July 17, 1997 Orders (Doc. # 664) and the motion of Xerox Corporation ("Xerox") for reconsideration of the court's March 19 and 21, 1997 Orders (Doc. # 666). Both parties' motions concern the legal issue of whether Xerox's unilateral refusal to license or sell its patented and copyrighted products may constitute a misuse defense to an infringement claim or unlawful exclusionary conduct under the antitrust laws.
The court originally held that Xerox's refusal to deal could constitute misuse and exclusionary conduct. See Mar. 19 Mem. & Order at 7-16, 22; Mar. 21 Mem. & Order at 18-19. Xerox requested and the court granted reconsideration of this ruling with respect to Xerox's patented products. On reconsideration, the court held that Xerox's unilateral refusal to sell or license its patented products cannot constitute patent misuse or unlawful *1133 exclusionary conduct under the antitrust laws. See Apr. 8 Mem. & Order at 16-22. CSU requested reconsideration or, in the alternative, certification of the court's April 8 order. On July 17, the court denied CSU's motion for reconsideration, but granted CSU's request to certify the April 8 order for interlocutory appeal. See July 17 Mem. & Order at 2-6. On September 8, the Federal Circuit declined to hear the appeal. See CSU Holdings, Inc. v. Xerox Corp., 129 F.3d 132, 1997 WL 632785 (Fed.Cir.1997). CSU now requests reconsideration of the court's ruling with respect to patents, while Xerox requests that the court extend its ruling on patents to the area of copyrights. After careful consideration of the parties' briefs and the authorities cited therein, the court will deny CSU's motion for reconsideration and grant Xerox's motion.
Factual Background
The factual background of this matter has been set forth in the court's previous orders. The following is a brief summary.
In 1984, Xerox developed its first "parts policy," in which it declared it would not sell "parts which are unique to the `10' Series products in memory writers" to any Independent Service Organization ("ISO") unless the ISO also was an end-user of the product. In January 1987, the parts policy was expanded to apply to newer "9" Series models and all "10" Series copiers, plus all new Xerox products introduced after the effective date of the policy.
In January 1989, Xerox tightened enforcement of its existing parts policies and cut off CSU's direct purchase of restricted parts from Xerox. Xerox also implemented an "on-site end-user verification" procedure when certain ISOs or their customers ordered parts from Xerox. The policy, which was implemented in June 1989, initially applied solely to the six most successful ISOs, including CSU.
As a result of Xerox's parts policies, CSU claims that it did not have an assured source of supply of parts necessary to service Xerox copiers and printers. CSU argues that it abandoned its expansion plans as a result of Xerox's parts policies. To maintain its existing business, CSU used parts cannibalized from used Xerox equipment, parts obtained from other ISOs, and parts purchased through a limited number of customers. CSU also obtained parts from Rank Xerox, a majority-owned European affiliate of Xerox, for approximately one year, until Xerox forced Rank Xerox to stop selling parts to CSU and other ISOs.
In 1994, Xerox settled an antitrust lawsuit brought by a class of ISOs in the United States District Court for the Eastern District of Texas (the "R&D Litigation"). CSU opted out of the R&D settlement on the same day it filed the instant action against Xerox. Pursuant to the R&D settlement, Xerox agreed to suspend its restrictive parts policy for a period of six and one-half years. The settlement also compelled Xerox to license diagnostic software, an essential component for service, for four and one-half years.
After the R&D settlement, CSU claims that Xerox intensified its efforts to use price as a weapon to defeat ISO competition in the service market. CSU alleges that Xerox intentionally set the prices of its patented parts at high levels to act as a weapon against ISOs and to maintain Xerox's monopoly of the service market. Xerox charges ISOs significant markups on its parts. Xerox does not charge its customers who also service their own machines ("self-servicers") the same parts prices it charges ISOs. CSU argues that Xerox explicitly set the price of its patented parts, not to recoup its development costs, but to force ISOs to raise the prices they charge customers. CSU maintains that Xerox's goal of its pricing strategy was to eliminate ISO competition and capture 100% of the service market.
CSU alleges in its complaint that Xerox violated the Sherman Act by seeking to eliminate ISOs generally and CSU particularly as competitors in the relevant service markets for high speed copiers and printers. CSU alleges that Xerox has engaged in abusive, exclusionary, and predatory conduct, by seeking to preempt business opportunities, refusing to deal with ISOs, denying essential facilities to ISOs or only providing them on unreasonable terms, and seeking to leverage *1134 its monopoly power in the relevant high volume equipment and parts markets to acquire and/or maintain monopoly power in the relevant service markets.
Xerox has asserted several defenses for its conduct. In the instant motions, Xerox contends that CSU has not suffered antitrust injury, because its alleged injury is attributable to Xerox's lawful refusal to sell patented parts and copyrighted software. Xerox also claims that CSU cannot assert a patent or copyright misuse defense to Xerox's infringement counterclaims based on Xerox's refusal to deal.
Analysis
To establish monopolization under section 2 of the Sherman Act, CSU must prove that (1) Xerox possessed monopoly power in the relevant market and (2) Xerox willfully acquired or maintained that monopoly power "as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 480, 112 S. Ct. 2072, 2080, 119 L. Ed. 2d 265 (1992) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S. Ct. 1698, 1703-04, 16 L. Ed. 2d 778 (1966)). In the instant motions, Xerox does not contest that it has monopoly power in the relevant parts and service markets. The disputed issues arise over whether Xerox's refusal to sell its patented and copyrighted products satisfies the conduct element of a section 2 claim.[1]
CSU's primary basis for requesting reconsideration of our prior rulings and denial of Xerox's motion for reconsideration is the Ninth Circuit's recent decision in Image Tech. Servs., Inc. v. Eastman Kodak Co. ("Kodak"), 125 F.3d 1195 (9th Cir.1997). In Kodak, the court held that "`while exclusionary conduct can include a monopolist's unilateral refusal to license a [patent or] copyright,' or to sell its patented or copyrighted work, a monopolist's `desire to exclude others from its [protected] work is a presumptively valid business justification for any immediate harm to consumers.'" Id. at 1218 (quoting Data General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1187 (1st Cir.1994)). The court explained that "Kodak may assert that its desire to profit from its intellectual property rights justifies its conduct, and the jury should presume that this justification is legitimately procompetitive." 125 F.3d at 1219. Nevertheless, the Ninth Circuit held that the presumption afforded copyright and patent holders can be rebutted by evidence that the intellectual property holder's refusal to deal was not truly based on a desire to protect its intellectual property rights. Id. As explained in detail below, we decline to follow the Ninth Circuit's holding in Kodak. Rather, we find that where a patent or copyright has been lawfully acquired, subsequent conduct permissible under the patent or copyright laws cannot give rise to any liability under the antitrust laws. See Miller Insituform, Inc. v. Insituform of North Am., Inc., 830 F.2d 606, 609 (6th Cir.1987), cert. denied, 484 U.S. 1064, 108 S. Ct. 1023, 98 L. Ed. 2d 988 (1988); United States v. Westinghouse Elec. Corp., 648 F.2d 642, 647 (9th Cir.1981); SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1206 (2d Cir.1981), cert. denied, 455 U.S. 1016, 102 S. Ct. 1708, 72 L. Ed. 2d 132 (1982); see also Data General, 36 F.3d at 1185-87 (noting that a monopolist's unilateral refusal to license a patent is not exclusionary conduct while holding that a monopolist's unilateral refusal to license a copyright may be exclusionary conduct "in rare cases" apparently only when the copyright has been acquired in an unlawful manner).
I. A Single Patent Can Implicate Multiple Antitrust Markets.
We begin with a discussion of the distinction between a "patent monopoly" and *1135 an "economic monopoly." See American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1367 (Fed.Cir.) ("The patent system, which antedated the Sherman Act by a century, is not an `exception' to the antitrust laws, and patent rights are not legal monopolies in the antitrust sense of that word."), cert. denied, 469 U.S. 821, 105 S. Ct. 95, 83 L. Ed. 2d 41 (1984); Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1160 n. 8 (6th Cir.1978) ("The loose application of the pejorative term `monopoly,' to the property right of exclusion represented by a patent, can be misleading. Unchecked it can destroy the constitutional and statutory scheme reflected in the patent system."). The scope of a "patent monopoly" is defined by the claims of the patent, not by the limits of what a court determines is the most analogous antitrust market. See Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 221, 100 S. Ct. 2601, 2625-26, 65 L. Ed. 2d 696 (1980) ("[T]he boundary of a patent monopoly is to be limited by the literal scope of the patent claims."); Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 510, 37 S. Ct. 416, 418, 61 L. Ed. 871 (1917) ("The patent law simply protects [the patent holder] in the monopoly of that which he has invented and has described in the claims of his patent."); see also Kodak, 125 F.3d at 1216-17 ("The relevant market for determining the patent or copyright grant is determined under patent or copyright law."). On the other hand, an "economic monopoly," as we have used the term, refers to a firm's power to control the price of a product in a properly defined relevant antitrust market.
We believe that the Ninth Circuit in Kodak, in reaching its conclusion, implicitly assumed that a single patent can create at most a single "inherent" economic monopoly. 125 F.3d at 1215-16. The Supreme Court in Kodak certainly did not reach this issue. In Kodak, the Supreme Court stated that it "has held many times that power gained through some natural and legal advantage such as a patent, copyright, or business acumen can give rise to [antitrust] liability if `a seller exploits his dominant position in one market to expand his empire into the next [market].'" Kodak, 504 U.S. at 479 n. 29, 112 S.Ct. at 2089 n. 29 (quoting Times-Picayune Publ'g Co. v. United States, 345 U.S. 594, 611, 73 S. Ct. 872, 881-82, 97 L. Ed. 1277 (1953)). The Court's statement simply is not applicable where a patent holder, exercising his unilateral right to refuse to license or use his invention, acquires a monopoly in two separate relevant antitrust markets. There is no unlawful leveraging of monopoly power when a patent holder merely exercises its rights inherent in the patent grant. In other words, to the extent Xerox gained its monopoly power in any market by unilaterally refusing to license its patents, such conduct is permissible under the antitrust laws. Xerox's legal right to exclude ISOs in the service markets from using Xerox's patented inventions arose from its patents, not from an unlawful leveraging of its monopoly power in the parts market.
The patent statute illustrates that a patent holder's unilateral refusal to deal cannot constitute unlawful leveraging of monopoly power. The Patent Reform Act of 1988 added subsection 271(d)(4), which provides:
No patent owner otherwise entitled to relief for infringement or contributory infringement shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of having ... refused to license or use any rights to the patent.
35 U.S.C. § 271(d)(4) (emphasis added). The Ninth Circuit in Kodak and CSU maintain that this statutory provision only bars a misuse defense to an infringement claim but does not preclude antitrust claims premised on a unilateral refusal to license a patented work. 125 F.3d at 1214 n. 7. Such an interpretation is contrary to the statutory language and legislative history of the amendment. First, the statutory language "illegal extension of the patent right" is an alternative to "deemed guilty of misuse." The statutory provision would be redundant if "illegal extension of the patent right" applied only to misuse defenses. Accordingly, we believe that section 271(d)(4) should be interpreted to apply to antitrust claims. The language "illegal extension of the patent right" closely tracks the antitrust law prohibition against an unlawful extension of market power beyond *1136 the limits of the patent monopoly. See generally Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed.Cir. 1990). Moreover, the legislative history also supports the conclusion that section 271(d)(4) applies to antitrust claims. Representative Kastenmeier stated that "codification of the `refusal to use or license' as not constituting patent misuse is consistent with the current caselaw and makes sense as a matter of public policy." 134 Cong.Rec. H10646, H10648 (Oct. 20, 1988). Representative Kastenmeier first cited SCM, 645 F.2d at 1203-06, and then Continental Paper Bag Co. v. Eastern Paper Bag, Co., 210 U.S. 405, 426-30, 28 S. Ct. 748, 754-56, 52 L. Ed. 1122 (1908), in the legislative history as support for the amendment. The SCM case involved only an antitrust claim. Why would Representative Kastenmeier cite an antitrust case as the primary authority for a statutory provision Congress intended to limit only to patent misuse claims? Finally, the court notes that section 271 of the patent statute would be virtually meaningless to many patent holders if it did not also apply to antitrust claims. It makes little sense to preclude an infringer from asserting a misuse defense based on a patent holder's refusal to deal while simultaneously allowing the infringer to recover treble damages under the antitrust laws for the very same conduct. See Rohm & Haas Co. v. Dawson Chem. Co., 557 F. Supp. 739, 835 (S.D.Tex.) ("it would be superfluous to sanction and protect activity within one area of the law and concurrently prohibit and expose a patentee to damages by reason of another body of law"), rev'd on other grounds, 722 F.2d 1556 (Fed.Cir.1983). Several courts have applied section 271 to both antitrust and patent misuse defense claims. See, e.g., Polysius Corp. v. Fuller Co., 709 F. Supp. 560, 575 (E.D.Pa.) (pursuant to section 271, "Congress has mandated ... [that] plaintiffs cannot be guilty of either antitrust violations or patent misuse"), aff'd, 889 F.2d 1100 (Fed.Cir.1989); see also Data General, 36 F.3d at 1187 (noting that section 271 "may even herald the prohibition of all antitrust claims and counterclaims premised on a refusal to license a patent.").
The Ninth Circuit in Kodak and CSU assume, without discussion, that a single patent (or "patent monopoly") can be equated with a single relevant antitrust market. Although most patented inventions likely will be marketed in a single antitrust market, some inventions may be useful in multiple markets. The Ninth Circuit's holding would discourage the invention of such products. Inventors rarely could refuse to license their products without fear that they had not properly defined the relevant antitrust market or considered how the relevant markets may be defined in the future. See Apr. 8 Mem. & Order at 18-19; SCM, 645 F.2d at 1206 ("If the threat of treble damage liability for refusing to license were imbedded in the minds of potential patent holders as a likely prospect incident to every successful commercial exploitation of a patented invention, the efficacy of the economic incentives afforded by our patent system might be severely diminished.").
We believe that a patent holder can lawfully acquire more than one "inherent" or "economic" monopoly by exercising the exclusionary power of a single patent. The court is not aware of any patent which states that it confers a monopoly in a particular antitrust market. Patents only claim inventions. Because each use of that invention may be prevented by the patent holder, the patent may have some anticompetitive effect in each market in which it is used or not used. See Apr. 8 Mem. & Order at 20 n. 5. The patent statute expressly grants patent holders the right to exclude others from manufacturing, selling, or using their inventions. See 35 U.S.C. § 154 ("Every patent shall contain ... a grant to the patentee, his heirs or assigns, for the term of seventeen years ... the right to exclude others from making, using, or selling the invention"); see also 35 U.S.C. § 271(d) (no patent holder shall be deemed guilty of misuse or illegal extension of the patent right by refusing to license or use any rights to the patent). Manufacturing, retail, and service markets all fall within this statutory grant of power to patent holders. Thus, Congress, by enacting the patent statute, apparently contemplated that a single patent could implicate more than one market. Courts also have allowed patent holders to exercise the exclusive power of a *1137 patent in multiple markets. See Miller Insituform, 830 F.2d at 609 (finding that a charge of "vertical integration" is inapplicable to a patent monopolist because "[t]here is no adverse effect on competition since, as a patent monopolist, INA, from the start, had exclusive right to manufacture, use, and sell his invention"); Servicetrends, Inc. v. Siemens Medical Systems, Inc., 870 F. Supp. 1042, 1056 (N.D.Ga.1994) ("Although the Court need not decide the issue here, it appears that defendant is entitled to a so-called monopoly in the repair of its shocktube replacement part a monopoly power that is inherent in its right to sell or refuse to sell the patented components."), amended on reconsideration, 1994 WL 776878 (N.D.Ga. Jun.24, 1994) (finding as a factual matter that the individual component parts of the shocktube were not patented).
CSU argues that the Ninth Circuit's decision in Kodak is supported by a number of cases that have held that patent holders are not immune from the antitrust laws. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969); United States v. Line Material Co., 333 U.S. 287, 68 S. Ct. 550, 92 L. Ed. 701 (1948); Atari, supra,. These authorities state the well-established law that a patent holder cannot use its patent to extend its power beyond the limits of the patent monopoly. See Zenith, 395 U.S. at 136, 89 S.Ct. at 1583 ("[T]here are established limits which the patentee must not exceed in employing the leverage of his patent to control or limit the operations of the licensee.") (emphasis added); Line Material, 333 U.S. at 308, 68 S.Ct. at 561 ("Possession of a valid patent or patents does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly.") (emphasis added); Atari, 897 F.2d at 1576 ("On the other hand, a patent owner may not take the property right granted by a patent and use it to extend his power in the marketplace improperly, i.e., beyond the limits of what Congress intended to give in the patent laws.") (emphasis added). Notably, none of the authorities cited by CSU, with the exception of Kodak, support the proposition that a patent holder's unilateral refusal to deal may constitute an unlawful extension of the patent monopoly or unlawful exclusionary conduct under the antitrust laws. A patent holder's right to exclude others from practicing an invention surely is within the limits of the patent monopoly as Congress specifically authorizes such conduct in the patent statute. See 35 U.S.C. § 154 (right to exclude others); 35 U.S.C. § 271(d) (no misuse or unlawful extension of monopoly for refusal to deal); see also Zenith, 395 U.S. at 135, 89 S.Ct. at 1583 ("The heart of [the patent holder's] legal monopoly is the right to invoke the State's power to prevent others from utilizing his discovery without his consent."). Accordingly, courts generally have not imposed antitrust liability on patent holders for conduct that is permissible under the patent laws. See Miller Insituform, 830 F.2d at 609; Westinghouse, 648 F.2d at 647; SCM, 645 F.2d at 1206; Servicetrends, 870 F.Supp. at 1056; Lightwave Technologies, Inc. v. Corning Glass Works, No. 86 Civ. 759(KC), 1991 WL 4737, at *7 (S.D.N.Y.1991); Chisholm-Ryder Co., Inc. v. Mecca Bros., Inc., 217 U.S.P.Q. 1322, 1338, 1982 WL 1950 (W.D.N.Y.1982), aff'd, 746 F.2d 1489 (Fed. Cir.1984); GAF Corp. v. Eastman Kodak Co., 519 F. Supp. 1203, 1233 (S.D.N.Y.1981); see also 3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 708d at 190 (Rev. 1996) (hereinafter "Areeda & Hovenkamp") ("And while courts have construed antitrust law to impose other constraints on patentee behavior such as I prohibiting the use of tying arrangements and similar practices none of those instances involved overriding an express patent law grant."). Indeed, the Ninth Circuit in Kodak recognized that it could "find no reported case in which a court has imposed antitrust liability for a unilateral refusal to sell or license a patent or copyright." 125 F.3d at 1216. Our April 8 and July 17 rulings regarding patents are entirely consistent with the pre-Kodak authorities cited by CSU because a patent holder's unilateral refusal to deal is within the express limits of the "patent monopoly." See United States v. Telectronics Proprietary, Ltd., 607 F. Supp. 753, 755 (D.Colo.1983) ("Indeed, the unilateral right to license, exclusively or otherwise, or to refuse to license at all, reflects the essence of the statutory patent monopoly.... *1138 Such unilateral licensing conduct does no more than employ means `normally and reasonably adapted' to maintain the monopoly under the law.").
In essence, CSU maintains that Xerox achieved too much success monopoly power in two antitrust markets by exercising its rights inherent in the patent grant. With the exception of the district court and the Ninth Circuit in Kodak, however, courts consistently have held that a patent holder's right to exclude others from using its patented invention is not conditioned on the economic success or failure of the patent holder. See Dawson, 448 U.S. at 215, 100 S.Ct. at 2622-23 (the patent statute gives a patent holder the "right to exclude others from profiting by the patented invention"); SCM, 645 F.2d at 1206 (a patent holder can continue "to exercise his patent's exclusionary power even after achieving commercial success; to allow the imposition of treble damages based on what a reviewing court might later consider, with the benefit of hindsight, to be too much success would seriously threaten the integrity of the patent system"). The court believes that the result should be no different whether a patent holder's success, achieved by conduct expressly sanctioned by the patent statute, impacts one or more relevant antitrust markets. See Miller Insituform, 830 F.2d at 609.
The rationale of the patent system mandates that a patent holder's right to exclude cannot be limited by the definition of the relevant antitrust markets. "The federal patent system [] embodies a carefully crafted bargain for encouraging the creation and disclosure of new, useful, and nonobvious advances in technology and design in return for the exclusive right to practice the invention for a period of years." Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150-51, 109 S. Ct. 971, 977, 103 L. Ed. 2d 118 (1989). Numerous courts have held that the patent holder's reward, his exclusive right to practice an invention, is unlimited by the law; the only limits on the patent holder's exercise of its right are created by the demand for the product which embodies the invention. See, e.g., King Instruments Corp. v. Perego, 65 F.3d 941, 950 (Fed.Cir.1995), cert. denied, 517 U.S. 1188, 116 S. Ct. 1675, 134 L. Ed. 2d 778 (1996) ("Thus, the Patent Act creates an incentive for innovation. The economic rewards during the period of exclusivity are the carrot. The patent owner expends resources in expectation of receiving this reward. Upon grant of the patent, the only limitation on the size of the carrot should be the dictates of the marketplace."); United States v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1129 (D.C.Cir.1981) ("The patent gives [the holder] the unlimited right to exclude others from utilizing its process."). "A valid patent gives to the public something it never had earlier. The resultant monopoly is outside of the antitrust laws and its exercise within the patent grant is not violative thereof." Chisholm-Ryder, 217 U.S.P.Q. at 1338; see United States v. United Shoe Machinery Co., 247 U.S. 32, 57, 38 S. Ct. 473, 482, 62 L. Ed. 968 (1918) ("Of course, there is restraint in a patent. Its strength is in the restraint, the right to exclude others from the use of the invention, absolutely or on the terms the patentee chooses to impose. This strength is the compensation which the law grants for the exercise of invention. Its exertion within the field covered by the patent law is not an offense against the AntiTrust Act."). Except for the district court and Ninth Circuit in Kodak, we are not aware of any court that has limited a patent holder's right to exclude others to a single relevant antitrust market. The reward for a patented invention is the right to exploit the entire field of the "invention," not the right to exploit the single most analogous antitrust market. See, e.g., Chisholm-Ryder, 217 U.S.P.Q. at 1338 ("One would have to be suffering from `unthinking monopolophobia' to deny [a patent holder] the right, given to it as the quid pro quo its right to exclude in exchange for its disclosure to the public of these inventions to monopolize the field covered by its patents to the exclusion of all others."); W.L. Gore & Assocs., Inc. v. Carlisle Corp., 529 F.2d 614, 623 (3d Cir.1976) ("The right to refuse to license is the essence of the patent holder's right under the patent law which rewards invention disclosure by the grant of a limited monopoly in the exploitation of the invention."); see also King Instruments, 65 F.3d at 950 ("This court should *1139 not presume to determine how a patentee should maximize its reward for investing in innovation.").
In Kodak, the Ninth Circuit also directed that the district court modify its injunction to eliminate the requirement that Kodak must sell its patented and copyrighted products at reasonable prices. The court acknowledged that "Kodak is entitled to monopoly prices on its patented and copyrighted parts." 125 F.3d at 1225. The modified injunction allows Kodak to charge "any nondiscriminatory price that the market will bear." Id. at 1225-26. The Ninth Circuit's treatment of the injunction is fundamentally inconsistent with its holding regarding the lawfulness of Kodak's refusal to license its intellectual property. As we have noted elsewhere, "[a] royalty demand which is so high as to preclude acceptance of a license offer is, after all, not appreciably different from a refusal to license upon any terms." W.L. Gore, 529 F.2d at 623; see 3 Areeda & Hovenkamp ¶ 708d at 189 ("[I]mposing a licensing duty would necessarily require judicial regulation of the royalty at which the [] patent would have to be licensed, for otherwise the patentee could negate the obligation by setting a rate so high that there would be no takers"). In addition, we note that the requirement of nondiscriminatory pricing directly conflicts with the basic tenet of patent law that a patent holder has an untrammeled right to selectively license its patent. See, e.g., Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 949 (Fed.Cir.1993), cert. denied, 510 U.S. 1140, 114 S. Ct. 1126, 127 L. Ed. 2d 434 (1994); Westinghouse, 648 F.2d at 647. A patent holder's right to price its patented products at different prices to different customers is inherent in the patent grant. See USM Corp. v. SPS Technologies, Inc., 694 F.2d 505, 512-13 (7th Cir.1982) (Posner, J.) (noting that "there is no antitrust prohibition against a patent owner's using price discrimination to maximize his income from the patent"), cert. denied, 462 U.S. 1107, 103 S. Ct. 2455, 77 L. Ed. 2d 1334 (1983).
Finally, CSU attempts to analogize this case to Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S. Ct. 2847, 86 L. Ed. 2d 467 (1985). In Aspen Skiing, defendant owned three of four ski locations in Aspen, Colorado. The court held that defendant had violated section 2 of the Sherman Act by refusing to continue a joint marketing arrangement with the owner of the fourth ski location in Aspen, which allowed customers to purchase a joint ticket useable at all four ski locations. The Court's holding was based on the unique facts where "competition required some cooperation among competitors" in the Aspen ski market and the joint tickets satisfied consumer demand. Olympia Equip. Leasing Co. v. Western Union Telegraph Co., 797 F.2d 370, 377 (7th Cir.1986); see Aspen Skiing, 472 U.S. at 603, 105 S.Ct. at 2857-58. We find Aspen Skiing distinguishable for two reasons. First, Aspen Skiing did not involve intellectual property rights. The Second Circuit has soundly rejected the argument that "a unilateral refusal to license a patent should be treated like any other refusal to deal by a monopolist." SCM, 645 F.2d at 1204. We agree with the Second Circuit's reasoning in SCM and conclude that the general law regarding refusals to deal by a monopolist cannot logically be imported to the patent and copyright areas without seriously undermining the objectives of the intellectual property laws.[2] Second, CSU has not shown that analogous facts exist in this case, i.e., that competition in the service market requires some cooperation among competitors or that consumers were harmed by Xerox's policies. The First Circuit rejected an antitrust plaintiff's attempt to invoke Aspen Skiing based on facts similar to this case. See Data General, 36 F.3d at 1188.
For all of the above reasons, we hold that if a patent is lawfully acquired, a patent holder's unilateral refusal to sell or license its patented invention does not constitute unlawful exclusionary conduct under the antitrust laws even if the refusal impacts competition in more than one relevant antitrust market.
*1140 II. A Patent Holder's Intent In Refusing To Deal Is Irrelevant.
In Kodak, the Ninth Circuit held that a patent holder's refusal to deal is a presumptively valid business justification for any harm to consumers, but such a presumption may be rebutted by evidence that the patent holder's refusal to deal was not truly based on a desire to protect its intellectual property rights. 125 F.3d at 1219. The Kodak court relied significantly on the First Circuit's Data General opinion for its holding. We believe, however, the Kodak holding goes significantly beyond, and in some respects is contrary to, the First Circuit's reasoning in Data General. The Ninth Circuit did not cite any authority for its conclusion that pretext is sufficient to rebut the presumption afforded patent and copyright holders for their refusal to deal. In Data General, the First Circuit criticized any "search for an overriding antisocial motivation" as "unilluminating." 36 F.3d at 1189. The First Circuit affirmed the grant of summary judgment in favor of the manufacturer notwithstanding the court's assumption that the manufacturer's policy was motivated by "the goal of maximizing revenues from its service business" and by the manufacturer's desire "to maintain its monopoly in the aftermarket for service of [its] computers." 36 F.3d at 1154, 1188. In contrast, the Ninth Circuit in Kodak treated the district court's failure to instruct that a patent holder's refusal to deal is presumptively valid as "harmless error" and accordingly affirmed a jury verdict against Kodak.[3]
CSU argues that by accepting Xerox's position, the court would have to hold that intent is not a fundamental issue under Section 2 of the Sherman Act. Intent to monopolize certainly is an essential element of a Section 2 claim, however, proof of intent to monopolize cannot transform a patent holder's unilateral refusal to deal into unlawful exclusionary conduct. The Supreme Court has held that a patent holder's subjective motivation for excluding others from use of an invention is irrelevant. In Continental Paper Bag, the Court stated: "As to the suggestion that competitors were excluded from the use of the new patent, we answer that such exclusion may be said to have been of the very essence of the right conferred by the patent, as it is the privilege of any owner of property to use or not use it, without question of motive." 210 U.S. at 429, 28 S.Ct. at 756 (citing Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 546, 22 S. Ct. 431, 434, 46 L. Ed. 679 (1902)) (emphasis added). Later, in Hartford-Empire Co. v. United States, 323 U.S. 386, 65 S. Ct. 373, 89 L. Ed. 322 (1945), the Court explained: "A patent owner is not in the position of a quasi-trustee for the public or under any obligation to see that the public acquires the free right to use the invention. He has no obligation either to use it or to grant its use to others." Id. at 432-33, 65 S.Ct. at 395-96. Courts similarly do not analyze a patent holder's subjective motivation in setting a license price. See W.L. Gore, 529 F.2d at 622-23 ("The [antitrust plaintiff's] speculation as to the [defendant's] motives in offering a license at what the [plaintiff] considered an exorbitant price, [] we regard as irrelevant.").
A patent holder's intent in exercising its exclusionary power is irrelevant because the right to exclude competitors from using an invention is expressly authorized by law. In United States v. Rock Royal Co-op., 307 U.S. 533, 59 S. Ct. 993, 83 L. Ed. 1446 (1939), the Supreme Court held that a price fixing conspiracy authorized by a milk cooperative law and order of the Secretary of Agriculture did not violate the antitrust laws regardless of defendants' "ulterior motives," other acts of fraud, public misrepresentations, and threats of a group boycott. Id. at 556-60, 59 S.Ct. at 1005-07; see Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 59, 113 S. Ct. 1920, 1927-28, 123 *1141 L.Ed.2d 611 (1993) ("Whether applying Noerr as an antitrust doctrine or invoking it in other contexts, we have repeatedly reaffirmed that evidence of anticompetitive intent or purpose alone cannot transform otherwise legitimate activity into a sham.").
The standard articulated by the Ninth Circuit in Kodak makes it very difficult for a jury, a judge, or even the patent holder, to distinguish between a permissible refusal to deal (based on a desire to profit from and protect patent rights) and an impermissible refusal to deal (apparently based on a desire to obtain a competitive advantage by excluding competitors). A patent holder does not refuse to share its invention because the property is patented, rather, the refusal is based on a desire to obtain a competitive advantage. See 3 Areeda & Hovenkamp ¶ 705b at 156 ("[N]o commercial firm invents except with the hope of prevailing over its rivals. And no one can apply for a patent without knowingly intending to acquire the legal power to exclude that is the entire point of the patent grant. As a result, the inventor's intent rarely or never provides a guide to determining liability."). The patent is merely the means by which its holder may obtain this competitive advantage. To classify the desire to obtain a competitive advantage over competitors as pretext is to read the right to exclude out of the patent statute. Under the Kodak standard, a self-serving memorandum in the files of a corporate executive, which states that the company is refusing to license its products because they are patented, apparently could be sufficient to protect the company's refusal to deal from antitrust scrutiny. On the other hand, a company would be subject to antitrust liability for having a corporate memorandum which states that the company plans to use its intellectual property rights to exclude competitors and achieve a competitive advantage in the marketplace. The monopolist's conduct, as well as the anticompetitive effect on the relevant markets, is identical in both circumstances. We decline to adopt a rule imposing antitrust liability based on such fine line distinctions of subjective intent. In essence, the difference between protected and unprotected conduct under Kodak is based on whether the company engaged in the formalistic ritual of documenting that "our patent rights is what truly is motivating our refusal to deal."[4] For the above reasons and given that nearly all commercial research is based on mixed motivations, we conclude that a patent holder is not required to proffer a legitimate business justification to avoid antitrust liability for exercising its right to refuse to sell or license a patented invention. See 3 Areeda & Hovenkamp ¶ 705 at 156-57.
III. A Patent Holder's Other Activities Are Not Relevant In Determining The Lawfulness Of Its Refusal To Deal.
We held in our previous orders that Xerox's refusal to license its patented products cannot be transformed into unlawful conduct merely because of Xerox's other alleged exclusionary acts. See July 17 Mem. & Order at 6. CSU argues that assuming Xerox's refusal to sell patented products is otherwise lawful, such conduct may be illegal if Xerox engaged in other unlawful exclusionary acts. CSU maintains that otherwise lawful conduct, when combined with unlawful acts pursuant to a scheme to monopolize, may violate Section 2 of the Sherman Act. The key to our April 8 and July 17 rulings, however, is that Xerox's refusal to license is expressly authorized by patent law and therefore immune from antitrust scrutiny. This result is compelled by the holdings of SCM, Miller Insituform, and Westinghouse. See, e.g., SCM, 645 F.2d at 1206 ("where a patent has been lawfully acquired, subsequent conduct permissible under the patent laws cannot trigger any liability under the antitrust laws") (emphasis added). None of the authorities cited by CSU discuss whether conduct expressly authorized by law may be transformed into unlawful conduct if such acts are part of a scheme to monopolize. See Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699, 82 S. Ct. 1404, 1410-11, 8 L. Ed. 2d 777 (1962) (group boycott); Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. *1142 464, 468-69, 82 S. Ct. 486, 488-89, 7 L. Ed. 2d 458 (1962) (same); Schine Chain Theatres v. United States, 334 U.S. 110, 119, 68 S. Ct. 947, 952-53, 92 L. Ed. 1245 (1948) (agreements not to compete); ES Dev., Inc. v. RWM Enterprises, Inc., 939 F.2d 547, 555 (8th Cir.1991) (group boycott), cert. denied, 502 U.S. 1097, 112 S. Ct. 1176, 117 L. Ed. 2d 421 (1992); Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509 (10th Cir. 1984) (refusal to include a competitor's product in package offering, discussed supra); Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 719 (7th Cir.1979) (defendant allegedly opened new stores in close proximity to plaintiff's stores for the purpose of putting plaintiff out of business), cert. denied, 445 U.S. 917, 100 S. Ct. 1278, 63 L. Ed. 2d 601 (1980).
Conduct expressly authorized by one law or governmental agency cannot be simultaneously subject to antitrust scrutiny. The Supreme Court in Rock Royal held that if the milk cooperative law and order of the Secretary of Agriculture were "otherwise valid, the fact that their effect would be to give cooperatives a monopoly of the market would not violate the Sherman Act." 307 U.S. at 560, 59 S.Ct. at 1006-07; see Professional Real Estate, 508 U.S. at 56-60, 113 S.Ct. at 1925-28 (petitioning of courts protected by First Amendment cannot violate antitrust law unless suit is "objectively meritless"); F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 633-35, 112 S. Ct. 2169, 2176-78, 119 L. Ed. 2d 410 (1992) (price fixing arrangements authorized by state regulators as a result of actual state involvement is not an antitrust violation). In the patent-antitrust area specifically, courts have held that conduct permissible under the Patent Act is not subject to antitrust scrutiny. See supra text at ___ and authorities cited therein; see also Simpson, 377 U.S. at 24, 84 S.Ct. at 1058 ("The patent laws which give a 17-year monopoly on `making, using, or selling the invention' are in pari materia with the antitrust laws and modify them pro tanto."); Line Material Co., 333 U.S. at 309, 68 S.Ct. at 561-62 ("The Sherman Act was enacted to prevent restraints of commerce but has been interpreted as recognizing that patent grants were an exception."); United Shoe, 247 U.S. at 57, 38 S.Ct. at 482 (noting that a patent holder's exercise of its right to exclude others from the use of the invention is "within the field covered by the patent law [and] is not an offense against the Anti-Trust Act").
CSU's proposed rule allowing a plaintiff to combine a defendant's lawful and unlawful activities effectively would eliminate the requirement that an antitrust plaintiff must show a "casual connection between the [defendant's] antitrust violations and [plaintiff's] injury." Continental Ore, 370 U.S. at 700, 82 S.Ct. at 1411; see Zenith, 395 U.S. at 114 n. 9, 89 S.Ct. at 1571 n. 9 ("It is enough that the illegality is shown to be a material cause of the injury"); National Ass'n of Review Appraisers v. Appraisal Found, 64 F.3d 1130, 1135 (8th Cir.1995) (plaintiff "may not recover for losses due to factors other than the [defendant's] anticompetitive violations") (internal citation omitted), cert. denied, 517 U.S. 1189, 116 S. Ct. 1676, 134 L. Ed. 2d 779 (1996). CSU apparently claims that a single unlawful exclusionary act by a defendant, no matter how trivial or insignificant, can and should subject all of defendant's legitimate competitive activities to antitrust scrutiny. We decline to adopt such a rule. Rather, we conclude that a patent holder is not subject to antitrust liability for exercising its right to refuse to sell or license a patented invention even if the patent holder engages in other allegedly anticompetitive conduct.
IV. A Copyright Holder Can Unilaterally Refuse To Sell Or License Its Copyrighted Materials.
The principles behind the Patent and Copyright Acts are the same: to encourage the development of works that promote consumer welfare in the long term by granting exclusive rights to the inventor or author. See Mazer v. Stein, 347 U.S. 201, 219, 74 S. Ct. 460, 471, 98 L. Ed. 630 (1954) ("The economic philosophy behind the clause empowering Congress to grant patents and copyrights is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors in `Science and useful Arts.'"); Data General, *1143 36 F.3d at 1186-87 (noting the goals of Copyright Act). In our March 21 Order, we held that a copyright misuse defense is viable "based primarily on the similar policies behind the patent and copyright laws." Mar. 21 Mem. & Order at 17 (citing Atari, 975 F.2d at 846 and Lasercomb, 911 F.2d at 976); see also Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439, 104 S. Ct. 774, 787, 78 L. Ed. 2d 574 (1984) (there is a "historic kinship between patent law and copyright law"). CSU concedes that patents and copyrights should be treated similarly for antitrust purposes, although CSU disagrees with the rule of law to be applied. Moreover, the Ninth Circuit in Kodak itself did not differentiate between patents and copyrights in analyzing the lawfulness of a manufacturer's refusal to deal.
We found previously that Xerox's unilateral refusal to license or sell its copyrighted products could constitute unlawful exclusionary conduct if the scope of Xerox's copyrights is limited to the parts market and there are separate antitrust markets for parts and service. See Mar. 21 Mem. & Order at 18-19. This rule of law could effectively limit the scope of a copyright holder's protection to a single relevant antitrust market. A copyright holder, however, receives protection for his "expression." A copyright holder "may refrain from vending or licensing [its product] and content [itself] with simply exercising the right to exclude others from using [its] property." Data General, 36 F.3d at 1186 (quoting Fox Film Corp. v. Doyal, 286 U.S. 123, 127, 52 S. Ct. 546, 546-47, 76 L. Ed. 1010 (1932)); see, Stewart v. Abend, 495 U.S. 207, 228-29, 110 S. Ct. 1750, 1763-64, 109 L. Ed. 2d 184 (1990) ("But nothing in the copyright statutes would prevent an author from hoarding all of his works during the term of the copyright. In fact, this Court has held that a copyright owner has the capacity arbitrarily to refuse to license one who seeks to exploit the work."). The Copyright Act gives copyright holders the exclusive right to reproduce and distribute its works. See 17 U.S.C. §§ 106, 501. We find nothing in the Copyright Act which limits a copyright holder's right to exclude to a single relevant antitrust market. A copyright holder's right to exclude is limited by the scope of protectable expression that is stated in the copyright, not by an analysis of the relevant antitrust markets. In reaching this conclusion, the court adopts by reference its discussion of why a patent holder's right to exclude is limited by the patent claims, not the relevant antitrust markets. See supra text at 7-20; July 17 Mem. & Order at 2; Apr. 8 Mem. & Order at 19-22. Accordingly, Xerox's unilateral refusal to license its copyrights does not constitute either copyright misuse or unlawful exclusionary conduct under the antitrust laws. Other courts have reached similar results. See Triad Systems Corp. v. Southeastern Exp. Co., 64 F.3d 1330, 1337 (9th Cir.1995) (rejecting copyright misuse defense based on manufacturer's refusal to license diagnostic software to ISOs), cert. denied, 516 U.S. 1145, 116 S. Ct. 1015, 134 L. Ed. 2d 96 (1996); Service & Training, Inc. v. Data General Corp., 963 F.2d 680, 690 (4th Cir.1992) ("appellants have offered no evidence that Data General did anything beyond limiting the use of the software to repair and maintenance of specific computer hardware, activity that is protected as an exclusive right of a copyright owner"); Advanced Computer Services of Michigan, Inc. v. MAI Systems Corp., 845 F. Supp. 356, 368-69 (E.D.Va.1994) (rejecting copyright misuse defense because "[i]t is within MAI's discretion to protect its copyrighted works, and this discretion includes the right to license its software to whomever it chooses"). As with patents, a copyright holder's intent and other activities are irrelevant in the determination of the lawfulness of a refusal to deal.
CSU argues that a refusal to license a copyright cannot be treated in the same manner as a refusal to license a patent because the Copyright Act does not contain a similar statutory provision to section 271(d)(4) of the Patent Act. CSU maintains that section 271(d)(4) was a principal basis of our prior holding regarding patents. Although section 271(d)(4) lends additional support and is consistent with our ruling on patents, we would reach the same result in the absence of section 271(d)(4). See, e.g., SCM, supra (decided before section 271(d)(4) was added); Miller Insituform, supra (same).
*1144 For all of the above reasons, we hold that if a copyright is lawfully acquired, a copyright holder's unilateral refusal to sell or license its copyrighted expression does not constitute unlawful exclusionary conduct under the antitrust laws or copyright misuse. A copyright holder can exercise its right to exclude others from using the protected expression, even if the exclusion impacts competition in more than one relevant antitrust market. A copyright holder's intent and any other alleged exclusionary acts are irrelevant in determining the lawfulness of a unilateral refusal to license a copyright.
IT IS THEREFORE ORDERED that the motion of CSU, L.L.C., for reconsideration of the court's April 8 and July 17, 1997 orders (Doc. # 664) is denied.
IT IS FURTHER ORDERED that Xerox's motion for reconsideration of the court's March 19 and 21, 1997 Orders (Doc. # 666) is granted. The court's March 19 and 21, 1997 Orders (Doc. 571 and 572) are modified as discussed herein.
NOTES
[1] If CSU can establish an antitrust violation with respect to Xerox's refusal to license its copyrights, the same evidence likely will establish copyright misuse, which is CSU's primary defense to Xerox's copyright infringement counterclaim. See Mar. 21 Mem. & Order at 17-18 (citing Lasercomb, Am., Inc. v. Reynolds, 911 F.2d 970, 978 (4th Cir.1990)). On the other hand, CSU's patent misuse defense is premised on Xerox's pricing of its patented products after April 1994, when Xerox started selling patented parts to CSU. We held previously that Xerox could price its patented parts as high as it sees fit. See Apr. 8 Mem. & Order at 24. Based on the Ninth Circuit's ruling in Kodak that a patent monopolist may charge a monopoly price for its products, CSU has not requested reconsideration of our previous ruling.
[2] In Data General, the First Circuit expressed some doubt about the applicability of Aspen Skiing in the area of intellectual property but assumed for purposes of the opinion that the exclusionary withdrawal of assistance could overcome, in certain circumstances, the presumption that a refusal to license a copyright is not exclusionary. 36 F.3d at 1188.
[3] CSU argues that we should follow the First Circuit's rationale in Data General, and adopt only a rebuttable presumption that Xerox's refusal to license patented and copyrighted products is lawful. Even under the First Circuit's standard, however, we would find for Xerox as a matter of law because imposing liability in this case likely would frustrate the purposes of the Patent and Copyright Acts. See id. at 1187 n. 64 ("we do not hold that an antitrust plaintiff can never rebut this presumption, for there may be rare cases in which imposing antitrust liability is unlikely to frustrate the objectives of the Copyright Act").
[4] Actually, it is unclear from the Kodak opinion exactly what documented reason would be sufficient to justify a refusal to deal. Accordingly, patent holders could rarely refuse to sell their patented products with any comfort that they are in compliance with the law.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1528646/
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719 A.2d 336 (1998)
COMMONWEALTH of Pennsylvania
v.
Henry SIMMONS.
Appeal of MENTOR CLINICAL CARE, Appellant.
COMMONWEALTH of Pennsylvania
v.
Henry SIMMONS.
Appeal of MENTOR CLINICAL CARE, ("Mentor"), Appellant.
Superior Court of Pennsylvania.
Argued April 21, 1998.
Filed October 2, 1998.
*337 Michael D. Brophy, Philadelphia, for appellant.
Andrew G. Gay, Philadelphia, for Simmons, appellee.
William G. Young, Asst. Dist. Atty., Philadelphia, for Com., appellee.
Before FORD ELLIOTT, MUSMANNO and HOFFMAN,[*] JJ.
FORD ELLIOTT, Judge:
At issue in this case of first impression is whether and to what extent appellant Mentor Clinical Care, Inc. ("Mentor") may be compelled to produce documents pertaining to a child in Mentor's care. Mentor asserts that the documents at issue are absolutely protected from any disclosure under the psychotherapist-patient privilege, 42 Pa.C.S.A. § 5944, and that even an in camera inspection as directed by the trial court would violate the privilege.
Mentor provides treatment for a variety of "special needs" populations, including those in need of mental health care. Mentor is licensed by the Pennsylvania Department of Public Welfare, Office of Mental Health under 55 Pa.Code Ch. 5310 ("Community Residential Rehabilitation for the Mentally Ill"). As explained by Mentor, the facility involved in this case is located in Conshohocken, one of several such treatment centers in Pennsylvania. Within the "at risk" population treated by Mentor staff are children referred by the Philadelphia County Department of Human Services. Eligibility for placement in the Mentor program is dependent upon a referral from a practicing psychiatrist, who certifies that the mental health services provided by Mentor will benefit the DHS client.
The program is operated by a "treatment team." Dr. Allan Brooks, Mentor's Psychiatric Medical Director and a fully-licensed psychiatrist, leads the team. He works part-time (three days a week) for Mentor. Dr. Brooks evaluates the child before he or she is placed in the Mentor program, and conducts face-to-face evaluations approximately three times a year thereafter, or as needed in the opinion of the team. Dr. Brooks composes an Individual Service Plan (ISP) to be carried out by other members of the team. The ISP identifies the specific needs of the child, sets goals for meeting those needs, and proposes ways of measuring progress toward those goals. The ISP may include prescription medicines as well as non-medicinal activities and interactions designed to meet the particular needs of the child. Every 30 days, *338 Dr. Brooks reviews the notes and evaluations composed by other members of the team; every 60 days, he updates the ISP.
Perhaps the most important team member from the child's perspective is the mentor adult, also known as a "mental health technician." The child lives in the home of the mentor adult. The adult is trained by Mentor for at least three days in a variety of skills necessary for living with and caring for the child. In this case, the mentor adult, Mrs. Kellie Simmons, was trained in "client socialization and role modeling skills, structured day and community resources, CPR and first aid, time-out training, related issues from physiological and psycho-social case work, introduction to nursing, positive practices, counter transference, cultural diversity and sexual abuse." (Notes of testimony, 5/28/97 at 49, R.R. 62a-63a.)
The mentor adult is responsible for carrying out the ISP on a daily basis. She also keeps a daily observational log of the child's activities, knowing that this record will form the basis for measuring the child's progress and for modifying the ISP as necessary. This record, labeled a "Pennsylvania Mentor Long-Term Psychiatric Treatment Log," instructs the mentor to "Please highlight major incidents, describe observable behaviors what is said, where or when, be objective and specific. Is the record free of labeling, blaming and interpretation?" (R.R. 89a.) In this log, the mentor is instructed to "Highlight positive/negative behaviors as they relate to the goals of the treatment plan." (Id.) The mentor adult enters into a contract with Mentor which describes the adult as an independent contractor. (R.R. 87a.)
Nine clinical coordinators with masters' degrees in social work, education, counseling, or other human services fields carry a case load of approximately eight children apiece. A clinical coordinator visits the child's home each week and discusses the child's needs, goals, progress, and any other pertinent information with the child and with the mentor adult. During these weekly visits, the clinical coordinator collects and reviews the daily logs compiled by the mentor adult. Finally, two program supervisors with masters' degrees in counseling, social work, or a related field oversee Mentor's clinical services.
In September 1992, minor T.W. was referred to Mentor's care.[1] Dr. Brooks initially evaluated T.W. and developed an ISP for her. Mentor assigned T.W. to live in the home of Mrs. Simmons. Her husband Henry Simmons, the defendant in the underlying criminal action, also lived in the home. Nothing in the record suggests that Mr. Simmons agreed to, or actually did, act as a mentor adult for the child.
Mr. Simmons has been charged with a number of crimes[2] arising from his alleged sexual abuse of T.W. On January 27, 1997, Mr. Simmons issued a subpoena to Mentor, demanding that it turn over its records concerning T.W. Mentor furnished certain records it did not consider privileged, and moved to quash the subpoena on the ground that the remainder of the records was protected from disclosure by the psychotherapist-patient privilege.[3]
On June 2, 1997, the trial court denied the motion to quash and issued this order:
It is hereby ORDERED:
1. Mentor Clinical Care's Motion to Quash defendant's subpoena is DENIED.
2. Mentor Clinical Care is directed to turn over the minor complainant's complete file to the Honorable D. Webster Keogh, or his designee. The assigned judge shall then determine whether any of the documents are subject to the psychiatrist-patient *339 privilege. Such documents would be:
those statements made by the minor complainant intended to be confidential communications and those obtained at the direction of a psychiatrist or licensed psychologist employed by Mentor Clinical Care; and
those records of the psychiatrist or licensed psychologist which contain references to confidential communications of the minor complainant.
3. Mentor Clinical Care's oral motion to certify this matter for an interlocutory appeal is DENIED.
4. Mentor Clinical Care's oral motion to stay the order to produce the record is DENIED.
Mentor's brief at 2.
In its supporting opinion, the court reasoned that (1) because the statute does not extend the privilege to social workers, "any communications made by the child to the social worker or by Mrs. Simmons to the social worker are not privileged" (trial court opinion, 7/29/97 at 4); (2) "[n]o privilege will be granted to the workers of Mentor because they are not agents of any psychiatrists or psychologists" (id. at 4); (3) the training provided to Mrs. Simmons is insufficient to make her a therapist or an agent of the psychiatrist (id. at 5-6); (4) the daily logs are not privileged in that they are merely "reports by a lay person on a child's activities and developments, not on `therapy sessions' conducted to relay information to a psychiatrist" (id.); and (5) statements made by T.W. which are both intended to be confidential and obtained at the direction of a licensed psychologist employed by Mentor are to be privileged, as are the psychologist's records which contain references to those confidential communications. (Id. at 6-7).
Mentor refused to comply with the order. On June 9, 1997, the trial court held Mentor in contempt and imposed a $100 fine. Mentor filed separate appeals from the June 2nd and June 9th orders. The June 2nd order, requiring Mentor to produce a complainant's allegedly confidential and privileged therapeutic records in a criminal matter, is immediately appealable as a collateral order. Commonwealth v. Miller, 406 Pa.Super. 206,, 593 A.2d 1308, 1309-1310 (1991). Because the appeal of the June 2nd order is properly before us, and because Mentor's brief does not discuss the merits of the contempt order, we need not discuss the appealability of the contempt order.[4]
So far as can be discerned from the record, no court official has reviewed any of Mentor's documents, nor have any disputed documents been turned over to Mr. Simmons' counsel. Mr. Simmons' criminal trial has not yet taken place. Mentor, Mr. Simmons, and the Commonwealth have all filed briefs in this matter. The Commonwealth's brief argues in favor of extending the privilege of § 5944 to all of Mentor's records.
*340 Mentor presents this Statement of the Question Involved:
Do psychiatric treatment records, including patient evaluations, progress notes, and behavioral observations, lose the protection of the absolute psychiatrist/patient privilege codified at 42 Pa.C.S.A. § 5944 merely because they do not consist of or contain references to the patient's confidential communications made to or obtained at the specific direction of her psychiatrist or psychologist?
Mentor's brief at 4.
Mentor argues that the trial court abused its discretion in limiting the protection of the privilege to those documents described in its June 2nd order. Mentor also argues that failing to protect the entire file would subvert the purpose of the psychotherapist-patient privilege, destroy the confidential relationship between T.W. and her treatment team, and "have detrimental effects on the mental health services offered by Mentor and other like institutions within this Commonwealth." (Id. at 10.) Although we find that Mentor's interpretation of the privilege is too broad, we also find the trial court's application of the privilege is too limited. Therefore, we vacate the trial court's order and remand.
As a general matter, "Pennsylvania law does not favor evidentiary privileges." In re Subpoena No. 22, 709 A.2d 385, 388 (Pa.Super.1998), citing Commonwealth v. Stewart, 547 Pa. 277, 282, 690 A.2d 195, 197 (1997) (clergy-communicant privilege applies only to confidential communications from communicant to clergy in his/her capacity as a spiritual advisor). "Thus, courts should accept testimonial privileges only to the very limited extent that permitting a refusal to testify or excluding relevant evidence has a public good transcending the normally predominant principle of utilizing all rational means for ascertaining the truth." Stewart, supra at 282, 690 A.2d at 197 (internal quotations omitted).
When reviewing a court's disposition of a motion to quash a subpoena, we grant great deference to the factual findings of the trial court. We will affirm the court's decision unless we find that the court abused its discretion or committed an error of law. In re Subpoena No. 22, 709 A.2d at 386.
The psychotherapist-patient privilege reads as follows:
§ 5944. Confidential communications to psychiatrists or licensed psychologists
No psychiatrist or person who has been licensed under the act of March 23, 1972 (P.L. 136, No. 52) [63 P.S. § 1201 et seq.], to practice psychology shall be, without the written consent of his client, examined in any civil or criminal matter as to any information acquired in the course of his professional services in behalf of such client. The confidential relations and communications between a psychologist or psychiatrist and his client shall be on the same basis as those provided or prescribed by law between an attorney and client.
42 Pa.C.S.A. § 5944.
The importance of the psychotherapist-patient privilege has been thoroughly addressed by this court.
Modeled after the attorney-client privilege, [Footnote 1] codification of the psychotherapist-client privilege is based upon a strong public policy that confidential communications made by a client to the psychotherapist should be protected from disclosure, absent consent or waiver. Commonwealth v. Fewell, 439 Pa.Super. 541, 548, 654 A.2d 1109, 1112 (1995).
The privilege afforded by § 5944 was intended to inspire confidence in the client and to encourage full disclosure to the psychologist [and psychiatrist]. By preventing the latter from making public any information which would result in humiliation, embarrassment or disgrace to the client, the privilege is designed to promote effective treatment and to insulate the client's private thoughts from public disclosure.
Id. at 548-49, 654 A.2d at 1112-13 (quoting Commonwealth v. Kyle, 367 Pa.Super. 484, 500, 533 A.2d 120, 128 (1987), appeal denied, 518 Pa. 617, 541 A.2d 744 (1988)).
All fifty state legislatures and the District of Columbia have enacted into law some form of the psychotherapist-client *341 privilege. Jaffee v. Redmond, [518 U.S. 1, 116 S. Ct. 1923, 135 L. Ed. 2d 337 (1996),] supra at 12 & n. 11 [ ... ]. The states also recognize a variety of exceptions to the privilege. Id. at 1930 n. 13, [116 S. Ct. 1923]. The law in this Commonwealth makes clear that the privilege accorded confidential communications between the client and the psychotherapist must prevail under most circumstances.
__________
[Footnote 1] 42 Pa.C.S.A. § 5916 and § 5928.
In re Subpoena No. 22, 709 A.2d at 388-389. The privilege, while testimonial in nature, has been held to cover the psychotherapist's client files which would contain the confidential communications of the client. Commonwealth v. Smith, 414 Pa.Super. 208, 606 A.2d 939 (1992), appeal denied, 533 Pa. 624, 620 A.2d 490 (1993); Commonwealth v. Kennedy, 413 Pa.Super. 95, 604 A.2d 1036 (1992), appeal denied, 531 Pa. 638, 611 A.2d 711 (1992); Kyle, supra.
In cases where the § 5944 privilege has been found to apply, case law has precluded the privileged material from being subjected to even in camera review by trial courts:
We decline to compromise what we have determined is an absolute privilege from disclosure. As we noted above, the purpose of the psychologist-client privilege is to aid in the effective treatment of the client by encouraging the patient to disclose information fully and freely without fear of public disclosure. We deem this purpose and the underlying considerations to be of paramount concern. Subjecting the confidential file to in camera review by the trial court (as well as the appellate courts and staff members) would jeopardize the treatment process and undermine the public interests supporting the privilege. Simply stated, an absolute privilege of this type and in these circumstances requires absolute confidentiality.
Kyle, supra at 504, 533 A.2d at 131.
Looking to the purposes of the privilege as addressed in such cases as Kyle and In re Subpoena No. 22, it is clear that the privilege is designed to protect confidential communications made and information given by the client to the psychotherapist in the course of treatment. The psychiatric file is imbued with the privilege because it might contain such confidential information. However, the privilege is not designed to specifically protect the psychotherapist's own opinion, observations, diagnosis, or treatment alternatives particularly when such information finds its way beyond the client's personal file. While such information may be protected from disclosure by some other privilege, we decide that the § 5944 privilege is designed to protect disclosures made by the client. Having said this, we need to look to the precise nature of the files Mentor seeks to protect, and their actual role in the treatment process. One of the most difficult aspects of this case is that the record does not contain a clear and comprehensive sense of what Mentor's files actually contain. For better or for worse for Mentor, we will rely on Mentor's own summary of their content.
As noted above, Mentor is licensed by the Pennsylvania Office of Mental Health under 55 Pa.Code Ch. 5310 as a Community Residential Rehabilitation Service (CRRS) Facility for the Mentally Ill. The licensing requirements and record-keeping obligations of such facilities are carefully set forth in the Code. The Code's statement of policy for CRRS makes it clear that the facility is one component in the comprehensive treatment of mentally ill persons, and must work cooperatively with other service agencies.[5] Mentor *342 is required to develop an Individual Service Plan based on a client's psychological evaluation which assesses the client's strengths and needs as they relate to independence in a residential environment. Pursuant to 55 Pa.Code § 5310.33(c) and § 5310.123(c) the Service Plan must include the following items:
(1) Short and long-term goals for service formulated jointly by the staff and client [or, in the case of child clients under age 14, by the parent and agency having legal custody of the child, if applicable].
(2) Behaviors to be modified and skills to be developed.
(3) Type and frequency of rehabilitation services to be provided.
(4) Techniques and methods of service to be used.
(5) A list of persons involved in the implementation of the plan.
Additionally, the original residential service plan, subsequent plan revisions, written plan reviews, and documentation of client participation must be included in the client record. § 5310.33(g). Mentor asserts that based on these requirements, T.W.'s records include the following information which Mentor considers confidential:
reports of alleged sexual and physical abuse of T.W.;
Individual Service Plans prepared under the supervision of Dr. Brooks, addressing for the treatment team each of T.W.'s behavioral problems and recommended course of treatment;
psychiatric evaluations prepared by Dr. Brooks on the basis of records, such as daily logs, notes and other communications not exclusively attributable to T.W.;
visitation plans and other records disclosing T.W.'s family member[s] and behavioral problems of T.W.'s siblings;
clinical evaluations of T.W. prepared by licensed social workers, referencing psychiatric diagnoses;
medications prescribed for T.W. by Dr. Brooks; and
family progress notes and daily log notes of the mentor, Kellie Simmons.
Mentor's brief at 9.
What is curiously missing from this summary is any reference to confidential communications made or information given specifically by T.W. While we agree with Mentor that the above information is sensitive, and we believe it may very well be confidential and protected from disclosure under 55 Pa. Code §§ 5310.52 and 5310.142 and perhaps other provisions of the Mental Health Procedures Act, 50 P.S. § 7111, which will be addressed infra, we do not agree that such records are protected by the psychotherapist-patient privilege, 42 Pa.C.S.A. § 5944.
Mentor's records are developed in compliance with Mentor's responsibilities as a licensed CRRS provider. The record-keeping requirements of CRRS providers are set forth in the Code. Undoubtedly, the logs, interviews, and records are formulated to comply with T.W.'s overall treatment plan. However, although based upon private discussions *343 with T.W., the treatment plan itself is generated by Dr. Brooks and his team pursuant to the specific requirements of the Code.
While we believe that much of the record material Mentor seeks to protect goes beyond that which is specifically protected by § 5944, we believe that certain material may very well be covered by the privilege. The trial court recognized, and we agree, that to the extent any interview with T.W. reflects a confidential communication made by her to Dr. Brooks in the course of evaluation and treatment, then such a statement is protected by § 5944. However, the trial court refused to cloak Mentor, the social workers, or Mrs. Simmons with the privilege based primarily on their lack of training. While we agree that the exercise of the privilege is very limited with respect to other members of the team, we do find that any oral communication by T.W. in private to any member of the treatment team and used by the team for the purpose of psychotherapeutic evaluation is privileged. Additionally, any reference to such a communication in Mentor's files is privileged as well.
As set out supra, the § 5944 privilege sets forth that "The confidential relations and communications between a psychologist and his client shall be on the same basis as those provided or prescribed by law between an attorney and a client." In determining whether a communication by a client to someone other than his attorney is covered by the attorney-client privilege, courts have held that as long as the recipient of the information is an agent of the attorney and the statement is made in confidence for the purpose of facilitating legal advice, it is privileged. Commonwealth v. Noll, 443 Pa.Super. 602,, 662 A.2d 1123, 1126 (1995), appeal denied, 543 Pa. 726, 673 A.2d 333 (1996) (confidential statement to accident reconstructionist hired by attorney to determine whether the client should sue is privileged); Commonwealth v. Mrozek, 441 Pa.Super. 425, 428-31, 657 A.2d 997, 999-1000 (1995) (inculpatory statement to attorney's secretary made while defendant was seeking to retain attorney for legal representation and advice is privileged); Commonwealth v. Hutchinson, 290 Pa.Super. 254,, 434 A.2d 740, 744-745 (1981) (inculpatory statement made to investigator for public defender's office is privileged). In the attorney-client context, the job description of the recipient of a confidential communication or their lack of legal training is irrelevant so long as the recipient is an agent of an attorney and the statement is made in confidence for the purpose of obtaining or facilitating legal advice. We find that this reasoning should apply with equal force to members of the Mentor treatment team in conversations with T.W. in the course of facilitating the treatment plan.
Moreover, in Kalenevitch v. Finger, 407 Pa.Super. 431,, 595 A.2d 1224, 1228 (1991), we held that confidential communications to the agent of a licensed psychologist were privileged under § 5944. In that case, statements regarding the cause and extent of pain made by the patient to a nurse who was administering stress management therapy as directed by the psychologist were held to be privileged and inadmissible in a subsequent automobile accident lawsuit. The court relied upon the analogy to the attorney-client privilege to support its holding.
In line with Kalenevitch, we have little doubt that mentor adult Kellie Simmons, the clinical coordinators, and the program coordinators are all subordinates of Dr. Brooks, Mentor's Psychiatric Medical Director. Dr. Brooks oversees the child's treatment, evaluates the child at least three times per year, and revises the ISP every 60 days. The other members of the treatment team work together under Dr. Brooks to implement the ISP on a regular and ongoing basis, and report to Dr. Brooks periodically. Thus, the mere fact that the other members of the treatment team were not themselves psychologists does not defeat the privilege should it otherwise apply.[6] T.W. is entitled to protection *344 in her confidential communications to members of the team. Furthermore, as with the attorney-client privilege, the privilege attaches not only to statements by T.W. specifically elicited by the "agent," but also to volunteered or spontaneous confidential communications from the client to the agent. Thus, the trial court erred by limiting privileged material to confidential communications "obtained at the direction of" Dr. Brooks.
Additionally, we find the trial court erred in requiring Mentor to turn over its complete file on T.W. to the trial court for an in camera determination as to whether the privilege should apply to any material in the file. Having determined that the § 5944 privilege protects any confidential statements made by T.W. to any member of the treatment team during the course of private interviews conducted for purposes of review and evaluation of the treatment plan, such file material is not subject to any in camera review. Kyle, supra; Kennedy, supra.
The co-extensive nature of the psychotherapist-patient privilege and the attorney-client privilege lends further support to our determination that only the confidential communications of T.W. are protected under § 5944. Following an interview with a client, an attorney will evaluate the legal claim, develop a legal strategy, and research legal alternatives, all of which are based on the confidential communications of his client. However, such files and material developed by the attorney are not protected by the attorney-client privilege. Rather, a separate rule has been developed to shield the attorney's work product, Pa.R.Civ.P. 4003.3. This rule may immunize "the lawyer's mental impressions, conclusions, opinions, memoranda, notes, summaries, legal research and legal theories." Leonard Packel & Anne Bowen Poulin, Pennsylvania Evidence § 502 (1987) at 314. Using this same analysis, Mentor's files containing diagnoses, opinions, evaluations, and treatment plans may all be directly related to client interviews; however, they are not confidential communications from the client covered under § 5944. Having accepted Mentor's summary of the contents of its treatment files, we once again conclude that except for interviews which include oral statements by T.W. herself as addressed supra, the Mentor files generally are not subject to § 5944.
However, we cannot simply remand at this point for further discovery of the remainder of Mentor's files or even a limited in camera review of non-privileged material. Just as with the attorney work product doctrine, we believe that Mentor's files may very well be subject to additional confidentiality protections.
Mentor has directed us to 55 Pa.Code Ch. 5310 for a codification of its licensing and record-keeping requirements. Having reviewed this chapter, this court takes specific notice of § 5310.52 which deals with the confidentiality of CRRS records generally and § 5310.142 which incorporates these provisions for confidentiality of records involving children. These provisions are set forth as follows:
§ 5310.52. Confidentiality
(a) All client records and information are confidential and may not be disclosed directly or indirectly without the written consent of the client except:
(1) To those persons actively engaged in implementing the client's residential or overall treatment plan.
(2) To persons using material from client records for teaching, training or research purposes, provided the use and dissemination of such data does not identify individual clients and a specific, written request stating the purpose for the disclosure is approved by the Director.
(3) To any governmental or third party payor which funds in whole or in part the cost of the client's care.
(4) To reviewers and inspectors when necessary to obtain certification on an eligible provider of services.
(5) Under court order.
*345 (6) In accordance with other applicable Federal and State regulations.
(b) Information made available under this section must be limited to that information necessary for the purpose for which the information is sought.
(c) Annually, these confidentiality requirements must be reviewed with all staff, volunteers, students, and others, as applicable, and as they enter their position or are assigned to the CRRS.
(d) The community residential rehabilitation service (CRRS) must keep client records within locked storage containers at all times when not in active use by program staff.
(e) Client written consent is required to disclose information from the client's record. The consent form must include the:
(1) Date and nature of request for information.
(2) Name of the person, agency or organization to whom disclosure is made.
(3) Type of information disclosed.
(4) Dated signature of the client.
(5) Dated signature of a witness.
(6) Expiration date of consent form.
(7) Statement of the client's right to revoke consent.
(f) One copy of each signed consent form must be given to the client and one copy included in the client's case record.
* * * * * *
§ 5310.142. Confidentiality.
(a) All client records and information are confidential and may not be disclosed directly or indirectly without the written consent of the child's parent or the agency having custody of the child, if applicable, and the child if the child is 14 years of age or older.
(b) Exceptions stated in § 5310.52(a)(1) (6) apply to client records and information in community residential rehabilitation service (CRRS) for children.
(c) Written consent is required by the child's parent or the agency having custody of the child, if applicable, and the child if the child is 14 years of age or older to disclose information from the child's record and must include:
(1) Date and nature of request for information.
(2) Name of the person, agency or organization to whom disclosure is made.
(3) Type of information disclosed.
(4) Dated signature of the child's parent, or the agency having legal custody of the child and the child if the child is 14 years of age or older.
(5) Dated signature of a witness.
(6) Expiration date of consent form.
(7) Statement of the rights of the parent or agency having custody of the child and the child to revoke the consent each has given.
(d) A copy of each disclosure consent form must be given to the parent or agency having legal custody and the child if the child is 14 years of age or older. A copy must also be placed in the child's case record.
(e) Subsections (a) and (b) supersede § 5310.51(a) (relating to confidentiality); subsection (c) supersedes § 5310.52(e); and subsection (d) supersedes § 5310.52(f).
The exceptions provided by these sections do not make the files themselves any less confidential. Rather, the exceptions clearly define to whom and for what purpose confidential information may be disclosed. The exceptions are further modified by § 5310.52(b) which allows for the disclosure of information that is limited to the purpose for which the information is sought. It appears to this court that Mentor's records are required to be deemed confidential. These Code sections along with others referenced below are drafted to codify the intent and procedures of the Mental Health Procedures Act (MPHA). It would appear that pursuant to 50 P.S. §§ 7103 and 7105, a CRRS facility may be covered under the MPHA. The MPHA additionally contains its own, and more restrictive, confidentiality provisions under § 7111. Finally, we direct the parties' and the trial court's attention generally to 55 Pa.Code Ch. 5100 and its provisions governing confidentiality and release of confidential *346 information to and by courts as instructive on the issue of disclosure by court order.
What is eminently clear from a cursory review of all of this material is that the legislature has determined that mental health treatment records such as those before the court are entitled to protection from disclosure. How much protection and in what manner and form any disclosure may occur is not presently before this court.[7] On the state of this record, and because neither this court nor the trial court has been informed by the parties as to the applicability of other statutory confidentiality requirements, we are required to remand this matter to the trial court. The confidentiality of these records cannot be deemed waived by Mentor because such a waiver belongs only to the client as set forth in the Code. On remand, we caution the trial court that before any confidential information from T.W.'s mental health records may be reviewed or released, a thorough examination of relevant statutory and Code provisions should take place.
The trial court's orders of June 2nd and June 9th are vacated, and the case is remanded for further proceedings consistent with this opinion. Jurisdiction relinquished.
NOTES
[*] Judge Hoffman did not participate in the consideration or decision of this case.
[1] No information regarding the referral appears in the record before this court.
[2] Appellant was charged with indecent assault, aggravated indecent assault, corruption of a minor, endangering the welfare of a child, unlawful restraint, false imprisonment, and recklessly endangering another person.
[3] At the first hearing on the subpoena in February 1997, Mentor sought to protect the records related to the interviews and evaluations of various social workers. Mentor did not believe that the logs kept by Mrs. Simmons were the subject of the subpoena. However, by the May 1997 hearing which led to the order under review, Mentor sought protection for its entire file citing the psychiatrist-patient privilege.
[4] The continuing procedural circumstances giving rise to this appeal are somewhat complex. In a separate order dated June 9, 1997, the court again ordered Mentor to turn over its records for in camera inspection. Mentor complied with this second order and turned its records over to Judge Renee Caldwell Hughes. On June 16, 1997, Mentor filed an appeal from the June 2nd order compelling production of records. Attached to this appeal was a petition for stay of the order pending appeal. On June 19, 1997, this court denied Mentor's stay application. On June 30, 1997, Mentor appealed from the trial court's June 9th contempt order. This appeal was then consolidated with Mentor's appeal of the June 2nd order.
In a supplemental opinion, the trial court writes that "because of the press of business, from June, 1997 to December, 1997, Judge Hughes was unable to review the massive stack of records. The criminal case was repeatedly continued." (Trial court supplemental opinion, 1/16/98 at 3.) In December 1997, the trial court directed Mentor to (1) retrieve the records from Judge Hughes; (2) mark any documents that were privileged as defined by the court's June 2nd order; and (3) return the entire file to Judge Hughes by January 6, 1998, at which time all unmarked documents would be sent to defendant Simmons. The court "confirmed" these informal instructions in an order dated December 24, 1997. Mentor then filed an application to stay the December 24th order. The superior court granted this application on January 6, 1998. Mentor's consolidated appeal from the trial court's June 2nd and June 9th orders is now before us. The trial court indicates that Mentor retrieved the documents from Judge Hughes "under questionable circumstances." (Trial court opinion, 1/16/98 at 4.)
[5] § 5310.2 Policy.
(a) Community Residential Rehabilitation Services (CRRS) are specifically designed and operated to assist persons with chronic psychiatric disability to live as independently as possible through the provision of training and assistance in the skills of community living and by serving as an integrating focus for the person's rehabilitation. CRRS are defined, regulated and operated to implement the principle of least restrictive service alternative. An individual shall be served by CRRS only for so long as the services are consistent with his need for services.
(b) The CRRS can exist only in a system of services for their clientele and cannot function without ties to other service providers. Rehabilitation of severely psychiatrically disabled individuals requires many and diverse services: CRRS have as their part in the process the development of the clients' skills for independent living and for community participation while more general social and vocational skills are developed and treatment occurs. CRRS' have an obligation to work cooperatively with other service agencies and with local coordinating and planning groups toward the development and operation of a comprehensive service system which can meet the needs of chronically mentally ill persons in a continuous, timely and coordinated manner.
(c) The CRRS have the following essential characteristics:
(1) A homelike, noninstitutional environment providing maximum opportunity to learn the skills necessary for more independent living.
(2) A residential setting providing each client with maximum possible autonomy, independence and self-determination.
(3) A program which constantly strives to enable clients to move to less restrictive living settings.
(4) Responsible staff to support and assist the client as needed in his movement to independence.
(5) Well-developed cooperative efforts with other agencies in the service delivery system to ensure coordinated, continuous and effective services for the rehabilitation of clients.
[6] In Jaffee v. Redmond, 518 U.S. 1, 116 S. Ct. 1923, 135 L. Ed. 2d 337 (1996), the United States Supreme Court held that Federal Rule of Evidence 501 recognized a psychotherapist-patient privilege, and that the privilege extended to the notes of confidential communications between a client and a licensed social worker performing psychotherapeutic services. We need not specifically decide if a social worker's notes are protected absent a agency relationship with a licensed psychiatrist or psychologist, because we find that the members of the treatment team were acting as agents of Dr. Brooks in this case.
[7] For a brief discussion of the burden of proof in such matters, see In re Subpoena No. 22, 709 A.2d at 388, and cases cited therein.
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893 S.W.2d 585 (1994)
MARATHON OIL CO., Relator,
v.
The Honorable Eric V. MOYE, Judge Presiding 101st District Court of Dallas County, Texas, Respondent.
No. 05-94-00040-CV.
Court of Appeals of Texas, Dallas.
December 12, 1994.
*588 Clifton T. Hutchinson, Darrell E. Jordan, Mark K. Sales, Dallas, TX, for appellant.
Michael Lowenberg, Dallas, TX, for appellee.
Before BAKER, LAGARDE and MALONEY, JJ.
OPINION ON MOTION FOR REHEARING
BAKER, Justice.
We withdraw our opinion of August 16, 1994, and the conditional grant of Relator's petition for writ of mandamus issued on August 16, 1994. The following is now the Court's opinion.
Marathon Oil Co. challenges a discovery order entered by respondent requiring the production of documents. Marathon claims privilege under the attorney-client privilege or the attorney work product exemption from discovery. We agree with Marathon. The trial court abused its discretion in rejecting Marathon's claim of privilege. We conditionally grant the writ.
THE DISCOVERY DISPUTE
St. Clair-Urdaneta, Inc. assigned Colombian coal licenses to Marathon under a binding letter of intent. St. Clair received payment and a nonparticipating royalty interest in exchange for the licenses. St. Clair sued Marathon alleging breach of the letter of intent. St. Clair claimed Marathon breached its contractual duty to use its best efforts in maintaining the coal licenses in good standing when the Colombian government nationalized the domestic coal industry. St. Clair sought damages for loss of royalties because Marathon gave up the coal licenses that St. Clair had transferred to Marathon.
St. Clair sought production of documents from Marathon and filed motions to compel. Marathon produced some documents and asserted privilege to others. Marathon submitted a privilege log identifying 914 documents. Marathon also submitted affidavits from two of its attorneys. The trial court conducted an in camera inspection of these documents. After its inspection, the trial court ordered Marathon to produce 759 of the 914 documents. In some instances, the trial court found documents privileged, but denied privilege to their duplicates. The trial court did not state the reason for ordering the documents produced.
Marathon contends the trial court improperly ordered production of privileged documents because St. Clair did not refute Marathon's *589 prima facie showing of privilege. St. Clair contests Marathon's privilege and, alternatively, contends Marathon waived any claim of privilege.
APPLICABLE LAW
A. Standard of Review
For mandamus to issue, the trial court must commit a clear abuse of discretion, and the relator must not have an adequate remedy at law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992) (orig. proceeding); Kavanaugh v. Perkins, 838 S.W.2d 616, 618 (Tex.App.Dallas 1992, orig. proceeding). The test for abuse of discretion is not whether, in the opinion of the reviewing court, the facts present a proper case for the trial court's action. Rather, the question is whether the court acted without reference to any guiding rules or principles. See Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986).
When a trial court's interpretation of discovery law is at issue, we treat the trial court's order as a legal conclusion. We review the legal conclusion with limited deference to the trial court. See Walker, 827 S.W.2d at 840. The trial court has no discretion to determine the law or to apply the law to the facts incorrectly. Methodist Home v. Marshall, 830 S.W.2d 220, 223 (Tex.App. Dallas 1992, orig. proceeding). A clear failure by the trial court to analyze or apply the law correctly is an abuse of discretion. Walker, 827 S.W.2d at 840.
Mandamus will not issue when there is an adequate remedy at law. Walker, 827 S.W.2d at 840; Reveal v. West, 764 S.W.2d 8, 10 (Tex.App.Houston [1st Dist.] 1988, orig. proceeding). A party does not have an adequate remedy at law when an appellate court cannot cure the trial court's erroneous discovery order. Walker, 827 S.W.2d at 843. An appellate court cannot cure the error when a trial court erroneously orders disclosure of privileged information that materially affects the rights of the aggrieved party. Walker, 827 S.W.2d at 843. When a trial court erroneously orders production of documents covered by the attorney-client privilege, there is no adequate remedy at law for the aggrieved party. See West v. Solito, 563 S.W.2d 240, 244 (Tex. 1978) (orig. proceeding).
B. Privilege
1. Attorney-Client
Rule 503 precludes discovery of the confidential communications made between client and attorney. Tex.R.Civ.Evid. 503. This privilege attaches to the complete communication between attorney and client. GAF Corp. v. Caldwell, 839 S.W.2d 149, 151 (Tex.App.Houston [14th Dist.] 1992, orig. proceeding). The subject matter of the information communicated between attorney and client is irrelevant when determining whether the privilege applies. Keene Corp. v. Caldwell, 840 S.W.2d 715, 720 (Tex.App. Houston [14th Dist.] 1992, orig. proceeding). Privilege attaches to legal advice and factual information included in completed communications between attorney and client. Pittsburgh Corning Corp. v. Caldwell, 861 S.W.2d 423, 425 (Tex.App.Houston [14th Dist.] 1993, orig. proceeding); GAF Corp., 839 S.W.2d at 151.
2. Work Product
Rule 166b(3)(a) precludes discovery of an attorney's work product. Tex.R.Civ.P. 166b(3)(a). The work product exemption shields the attorney's mental processes, conclusions, and legal theories. The exemption provides a privileged area within which the attorney can analyze and prepare the case. Owens-Corning Fiberglas Corp. v. Caldwell, 818 S.W.2d 749, 750 (Tex.1991) (orig. proceeding). The exemption extends not only to documents the attorney generates, but also to memoranda, reports, notes or summaries of interviews, etc. prepared by other persons for an attorney's use. Tex.R.Civ.P. 166b (3)(a); GAF Corp., 839 S.W.2d at 151.
3. Burden of Proof
To show a privilege, a party must plead the particular privilege, produce evidence to support the privilege through affidavits or testimony, and produce documents if the trial court determines that an in camera review is *590 necessary. See Tex.R.Civ.P. 166b(4); Peeples v. Fourth Supreme Judicial District, 701 S.W.2d 635, 637 (Tex.1985) (orig. proceeding).
4. In Camera Inspection
Often the allegedly privileged documents may be the only evidence substantiating the privilege claim. Weisel Enters., Inc. v. Curry, 718 S.W.2d 56, 58 (Tex.1986) (orig. proceeding). If the allegedly privileged documents are the only evidence to show the privilege, a party must produce the documents for an in camera inspection. Kavanaugh, 838 S.W.2d at 620.
When a party satisfies the procedural requirements for privilege and tenders the documents to the trial court, the trial court must conduct an in camera inspection. Shell W. E & P, Inc. v. Oliver, 751 S.W.2d 195, 197 (Tex.App.Dallas 1988, orig. proceeding). The trial court determines whether the privilege applies to the tendered documents during an in camera inspection. As a reviewing court, we may conduct our own in camera inspection to determine whether a trial court properly applied the law of privilege to the documents. Barnes v. Whittington, 751 S.W.2d 493, 495 (Tex.1988) (orig. proceeding).
C. Waiver of Privilege
1. Offensive Use
A person cannot claim privilege to pertinent evidentiary information while he simultaneously seeks affirmative relief. Republic Ins. Co. v. Davis, 856 S.W.2d 158, 163 (Tex.1993) (orig. proceeding); Ginsberg v. Fifth Court of Appeals, 686 S.W.2d 105, 107 (Tex.1985) (orig. proceeding). When a party uses the privilege as a sword rather than a shield, he waives the privilege. Davis, 856 S.W.2d at 163. Waiver based on offensive use of a privilege applies to confidential attorney-client communications. Davis, 856 S.W.2d at 164. Waiver based on offensive use of a privilege also applies to the attorney work product exemption. See Owens-Corning Fiberglas Corp., 818 S.W.2d at 752.
To find a waiver of the privilege through offensive use, the trial court must find three factors exist. First, the trial court must find the party asserting the privilege is seeking affirmative relief. Second, the trial court must find the privileged information, if believed by the fact finder, would probably be outcome determinative. Third, the trial court must find disclosure of the privileged communication is the aggrieved party's only means of access to the evidence. Trans-American Natural Gas Corp. v. Flores, 870 S.W.2d 10, 11-12 (Tex.1994); Davis, 856 S.W.2d at 163.
A defendant raising a declaratory judgment counterclaim is not necessarily seeking affirmative relief. Davis, 856 S.W.2d at 164. The declaratory judgment act is remedial in nature. See TEX.CIV.PRAC. & REM.CODE ANN. § 37.002(a) (Vernon 1986). The declaratory judgment act may not be used as an affirmative ground of recovery to revise or alter rights or legal relations. Davis, 856 S.W.2d at 164. When a defendant relies on privileged information to rebut a plaintiff's cause of action, the defendant is not seeking affirmative relief that is an offensive use of the privilege. National Union Fire Ins. Co. v. Valdez, 863 S.W.2d 458, 461 (Tex.1993) (orig. proceeding).
2. Voluntary Disclosure
A person waives privilege if he voluntarily discloses any significant part of the privileged material. Tex.R.Civ.Evid. 511. Disclosure of privileged documents can result in an implied waiver of the privilege to other documents. Terrell State Hosp. v. Ashworth, 794 S.W.2d 937, 941 (Tex.App.Dallas 1990, orig. proceeding [leave denied]). However, this waiver does not automatically allow disclosure of all privileged materials. National Union Fire Ins. Co. v. Hoffman, 746 S.W.2d 305, 311 (Tex.App.Dallas 1988, orig. proceeding).
D. Fiduciary Relationships
A fiduciary relationship is a formal, technical relationship of confidence and trust that imposes upon a fiduciary greater duties as a matter of law. Central Sav. & Loan v. Stemmons N.W. Bank, N.A., 848 S.W.2d 232, 243 (Tex.App.Dallas 1992, no writ). The duty *591 arises from the relationship of the parties. English v. Fischer, 660 S.W.2d 521, 524-25 (Tex.1983) (Spears, J., concurring). The confidential or fiduciary relationship arises from such relationships as attorney-client, partnership, trustee-cestui que trust, and from informal social, moral, or personal relationships. Central Sav. & Loan, 848 S.W.2d at 243.
A mere contractual relationship reserving a nonparticipatory royalty interest will not create a fiduciary relationship between the parties. Pickens v. Hope, 764 S.W.2d 256, 268 (Tex.App.San Antonio 1988, writ denied). The fact that a royalty interest owner is dependent upon the executive interest holder to manage the mineral estate in good faith does not of itself create a special relationship of trust and confidence. Pickens, 764 S.W.2d at 268. Unless the lease document itself creates a legally binding trust, or unless a relationship of trust and confidence necessarily results from the lessor-lessee relationship, the standard of conduct of the lessee cannot be appropriately categorized as fiduciary. Pickens, 764 S.W.2d at 268. However, when the executive and nonexecutive are cotenants in the mineral estate and there is a relationship of trust and confidence, a fiduciary relationship exists between the executive and nonexecutive interest holders. Pickens, 764 S.W.2d at 267 (discussing Manges v. Guerra, 673 S.W.2d 180 (Tex.1984)).
To determine whether a fiduciary relationship exists, the focus is on whether there is a relationship of trust and confidence. Pickens, 764 S.W.2d at 268. The party claiming a fiduciary duty has the burden of proving a fiduciary relationship exists. Consolidated Bearing & Supply Co., Inc. v. First Nat'l Bank, 720 S.W.2d 647, 648 (Tex. App.Amarillo 1986, no writ). Whether a fiduciary duty exists is a question of law. See Central Sav. & Loan, 848 S.W.2d at 243.
E. Joint Representation/Direct or Third-Party Beneficiary
The attorney-client privilege does not apply to a communication relevant to a matter of common interest between or among two or more clients if the communication was made by any of the clients to a lawyer retained or consulted in common, when offered in an action between or among any of the clients. See TEX.R.CIV.EVID. 503(d)(5). In the absence of privity of contract, an attorney owes no duty to a third party. See First Mun. Leasing Corp. v. Blankenship, Potts, Aikman, Hagin & Stewart, 648 S.W.2d 410, 413 (Tex.App.Dallas 1983, writ ref'd n.r.e.).
APPLICATION OF THE LAW TO THE FACTS
A. Prima Facie Claim of Privilege
Marathon satisfied the elements of a prima facie claim of privilege. Marathon pleaded privilege under the attorney-client privilege and work product exemption. Marathon submitted affidavits from its attorneys and a detailed privilege log to support the privilege claim. The log identified the documents and the privileges asserted to each of them. Finally, Marathon tendered the documents for the trial court's in camera review. Because Marathon made a prima facie case, the burden shifted to St. Clair to refute the privilege claim.
B. Documents Relate Only to Business Activities
St. Clair contested the privilege claim by arguing the documents sought related only to Marathon's business activities. Thus, St. Clair argues Marathon cannot claim privilege over the documents in dispute. However, St. Clair fails to recognize the subject matter of a completed attorney-client communication is immaterial when deciding if the privilege applies. See Keene Corp., 840 S.W.2d at 720; GAF Corp., 839 S.W.2d at 151. The conclusion that communications between Marathon and its attorneys concerned business activity is not determinative. St. Clair did not rebut Marathon's prima facie showing of privilege by alleging the communications related only to business activities.
C. Waiver
Alternatively, St. Clair argues Marathon waived any privilege or exemption. *592 First, St. Clair argues Marathon is using the privilege offensively. A claim for affirmative relief is an essential element of the offensive use waiver. St. Clair argues Marathon seeks affirmative relief by raising affirmative defenses. St. Clair cites National Union Fire Insurance Co. v. Valdez to support its argument. St. Clair misreads Valdez. Valdez does not hold that an assertion of affirmative defenses is a claim for affirmative relief. See Valdez, 863 S.W.2d at 461. In fact, Valdez points out that National Union did not assert an affirmative defense. See Valdez, 863 S.W.2d at 461. St. Clair cites no other authority to support its assertion. The facts here do not show Marathon sought affirmative relief. Waiver based on offensive use of a privilege does not apply.
D. Fiduciary Duty
Second, St. Clair contends Marathon owed St. Clair a fiduciary duty, which prevented Marathon from asserting privilege against St. Clair. St. Clair argues Marathon and St. Clair were in a special relationship because Marathon represented St. Clair's property interests in negotiations and litigation in Colombia. St. Clair also argues the letter of intent created a relationship analogous to the relationship between an executive interest holder and a nonexecutive interest holder in the oil and gas context.
Marathon and St. Clair entered into a binding letter of intent requiring Marathon to form a joint venture with a third party to develop the Colombian coal licenses. The letter of intent provided Marathon would make cash payments to St. Clair in consideration of St. Clair's assignment of its Colombian coal licenses. St. Clair also received a nonparticipatory royalty interest in coal sold under the licenses in consideration of the assignment. The contractual relationship reserving a nonparticipatory royalty interest in St. Clair did not create a fiduciary duty. See Pickens, 764 S.W.2d at 268.
St. Clair relies on Manges to argue that Marathon owed St. Clair a fiduciary duty. However, under the undisputed facts here, Manges does not apply. In Manges, the executive and nonexecutive were cotenants in a mineral estate. Also, the court found a relationship of trust and confidence between the parties, which created a fiduciary relationship. Manges, 673 S.W.2d at 184.
Here, there is no cotenancy in a property interest, only assignment of licenses with a reservation of a nonparticipating royalty interest. Also, St. Clair produced no other evidence to show a relationship of trust and confidence between it and Marathon. The relationship between the parties in Pickens more accurately characterizes the relationship between Marathon and St. Clair. Neither the contract nor Marathon's control over the licenses created a fiduciary relationship under the undisputed facts of this case. We find, as a matter of law, that St. Clair did not prove a fiduciary relationship existed between Marathon and St. Clair.
E. Voluntary Disclosure
Third, St. Clair argues Marathon impliedly waived privilege when Marathon produced other privileged documents in a previous lawsuit. However, an implied waiver is not an automatic, blanket waiver of the privilege for all underlying documents. See Hoffman, 746 S.W.2d at 311. St. Clair does not relate the documents produced to those shielded under Marathon's privilege claim. St. Clair makes only a general statement alleging the documents previously produced cover a broad range of subject matters and the contested documents cover the same matter. We hold such a general allegation of implied waiver of privilege does not defeat a prima facie showing of privilege.
F. Joint Representation/Direct or Third-Party Beneficiary
St. Clair argues the documents Marathon generated are discoverable because Marathon generated them in the course of a joint representation of Marathon's and St. Clair's interest. St. Clair also argues it was a direct or third-party beneficiary of the legal services Marathon's attorneys furnished Marathon under the provisions of the binding letter of intent. These arguments are without merit.
To set aside the attorney-client privilege of the documents St. Clair asserts are discoverable, *593 the record must show the communications were relevant to a matter of common interest among two or more clients and the communication was made by any of the clients to a lawyer retained in common or consulted in common. There is nothing in the record to show St. Clair and Marathon each retained Marathon's attorneys as their common attorneys. Nor is there anything in the record to show consultation by Marathon and St. Clair in common with Marathon's attorneys. There is nothing in the record to show an agreement for Marathon's attorneys to render legal services to St. Clair. To the contrary, the record shows that St. Clair and Marathon each had its own attorneys in negotiations leading up to the binding letter of intent. We conclude St. Clair's arguments of joint representation or direct contractual duty do not withstand scrutiny. See Tex. R.Civ.Evid. 503(d)(5); First Mun. Leasing Corp., 648 S.W.2d at 413.
Additionally, St. Clair's third-party beneficiary of the legal services argument is without merit. The binding letter of intent does not show St. Clair and Marathon intended, either expressly or impliedly, that St. Clair was a third-party beneficiary of the legal services rendered by Marathon's attorneys. We find, as a matter of law, St. Clair did not prove joint relationship or a direct or third-party beneficiary relationship so it defeated Marathon's prima facie showing of privilege.
G. Appellate In Camera Inspection
Finally, St. Clair contends the trial court based its order on an in camera factual determination, which bars review by this court. As a reviewing court, we may conduct our own in camera inspection to determine whether a trial court properly applied the law of privilege to the documents. Barnes, 751 S.W.2d at 495. St. Clair's contention is without merit.
We have conducted an in camera inspection of the documents. As a result of our inspection, we find Marathon must produce only ten documents. Six of the documents are not subject to privilege either under the attorney work product exemption or the attorney-client privilege.[1] We find the privilege and exemption do not apply because we cannot determine whether an attorney participated in the communications. Additionally, Marathon did not submit four of the documents identified in the privilege log.[2] Marathon has waived privilege on those four documents. See Freeman v. Bianchi, 820 S.W.2d 853, 858 (Tex.App.Houston [1st Dist.] 1991, orig. proceeding).
CONCLUSION
The trial court abused its discretion by ordering Marathon to produce the contested documents except for the ten documents previously mentioned. Marathon did not have an adequate remedy at law because the trial court erroneously ordered discovery of privileged documents. Kavanaugh, 838 S.W.2d at 619. We direct the Honorable Eric Moye of the 101st District Court, Dallas County, Texas to vacate his order requiring Marathon to produce all contested documents except for the ten documents identified in our order. We assume the respondent will follow the directions contained in this opinion. The writ will issue only if he fails to do so. We conditionally grant the writ.
NOTES
[1] The bates numbers for these six documents are: (1) PMIOC 001197-1198; (2) PMIOC 001244; (3) PMIOC 002776-2777; (4) PMIOC 003439; (5) PMIOC 003488; and (6) PMIOC 003743.
[2] The bates numbers for these four documents are: (1) PMIOC 000623; (2) PMIOC 000630; (3) PMIOC 000631-632; and (4) PMIOC 002216.
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219 A.2d 487 (1966)
Bonnie C. CAMARAS, p.p.a.
v.
Veronica MORAN.
Clara CAMARAS
v.
Veronica MORAN.
Ex. Nos. 10825, 10826.
Supreme Court of Rhode Island.
May 11, 1966.
*488 DelSesto & DelSesto, Christopher T. DelSesto, Jr., Providence, for plaintiffs.
Coffey, Ward, McGovern & Novogroski, Charles J. McGovern, Providence, for defendant.
KELLEHER, Justice.
These actions of trespass on the case were brought by the minor plaintiff and her mother against the defendant for personal injuries and consequential damages, respectively, incurred when the minor daughter collided with a milk bottle. The cases were tried together before a justice of the superior court sitting with a jury which returned a verdict for the defendant in each case. The plaintiffs have filed identical bills of exceptions. Since recovery in the mother's case depends upon the defendant's liability to the minor daughter, we shall treat the cases as if only the minor daughter's case was before us but our conclusion will apply to both.
The plaintiff has filed seven exceptions. However, we shall consider only those exceptions which she has briefed and argued. Under our rules all other exceptions are deemed to be waived.
On August 28, 1962 Bonnie C. Camaras age eight years and Veronica Moran age fifteen years left the Camaras home together and proceeded to a neighborhood store where each obtained certain items for their respective mothers. The plaintiff purchased ice cream and defendant purchased a bottle of milk. They returned to the Camaras residence and entered the premises through the garage from which a side screen door opened to the kitchen where Mrs. Camaras was preparing lunch. The plaintiff sat in a chair and took off her shoes and socks to examine a blister on her right foot. She then arose from the chair and started hopping on her left foot towards the screen door when she collided with the bottle of milk. The bottle "splattered" and Bonnie received injuries to her right foot which required hospitalization and surgery.
It is at this point that the parties hereto disagree. The plaintiff's mother testified that the gallon bottle of milk was placed against the riser of the step which led from the garage to the kitchen. The plaintiff corroborated her mother's testimony and stated she could not see the bottle because defendant was standing in front of it and that as she hopped to the kitchen door defendant stepped to one side and plaintiff hopped onto the bottle breaking it.
The defendant, however, testified that she had purchased a half-gallon bottle of milk and had placed it beside a table that was in the garage some three feet away from the kitchen step. She heard a crash, and saw Bonnie standing at the table, the *489 bottle broken. She denied that the bottle was in front of the step.
Anthony P. Ferrara testified on the second day of trial as a rebuttal witness for plaintiff. He was not present at the time of the incident and had gone to the Camaras home to clean up the broken glass which he stated was in front of the kitchen step. Thereafter, plaintiff made a motion for a continuance of the trial to the following morning so that the testimony of a police officer who had transported minor plaintiff to the hospital could be heard. The motion was denied and this ruling constitutes one of plaintiff's exceptions.
A motion for a continuance is addressed to the sound discretion of the trial justice. His decision will not be reversed unless there is a clear abuse of discretion. Martin v. Hammond, 89 R.I. 98, 151 A.2d 114; D'Acchioli v. Cairo, 87 R.I. 345, 141 A.2d 269.
It is the joint obligation of the bar and court to dispose of litigation in an orderly, prompt and expeditious manner. Here trial counsel for plaintiff informed the court that a witness subpoena had not been issued, that the police officer was on his day off, and that his testimony would be cumulative. These admissions of trial counsel amply warranted the denial of the motion for continuance. We find no abuse of discretion and plaintiff's exception to the denial of the motion is overruled.
One of plaintiff's exceptions is to a portion of the charge wherein the trial justice said that if the incident was a mere accident, then the jury should return a verdict for defendant. The court in its charge failed to distinguish between a pure accident, i.e., an occurrence to which human fault does not contribute, and an actionable accident, i.e., an occurrence which arises from the carelessness of men. The use of the term accident alone, or together with the adjectives mere, pure, inevitable or unavoidable, has given rise to a plethora of litigation.
As stated in Nave v. Flack, 90 Ind. 205, 210: "The poverty of language compels the use of words in different meanings, and this is notably true of the word `accident.' Strictly speaking, an accident is an occurrence to which human fault does not contribute; but this is a restricted meaning, for accidents are recognized as occurrences arising from the carelessness of men."
It is apparent that the word "accident" does not necessarily preclude fault or negligence. In an attempt to distinguish between accident as embodying the element of negligence from other unintended or unexpected events, the terms "mere accident," "pure accident," or "unavoidable accident" have been often used. Some courts have held that the mention of such phrases in a charge is not erroneous. Scullion v. Hackworth, Del. 199 A.2d 563; Ramage v. Trepanier, 69 N.D. 19, 283 N.W. 471; Webb v. Baldwin, 165 Mo. App. 240, 147 S.W. 849; Paulissen v. Jonas, 311 Ill. App. 346, 35 N.E.2d 958; Gallegos v. McKee, 69 N.M. 443, 367 P.2d 934.
This practice, however, has come under increasing criticism. Many courts do not approve of the use of these phrases in a charge to a jury. White v. Evansville American Legion Home Ass'n, Ind. 210 N.E.2d 845; Butigan v. Yellow Cab Co., 49 Cal. 2d 652, 320 P.2d 500, 65 A.L.R. 2d 1; City of Phoenix v. Camfield, 97 Ariz. 316, 400 P.2d 115; Vespe v. DiMarco, 43 N.J. 430; Kampo Transit, Inc., v. Powers, Ind. App. 211 N.E.2d 781.
An excellent discussion of this particular issue is found in 65 A.L.R. 2d 1.
In White v. Evansville American Legion Home Ass'n, supra, the court held it error to charge that if the plaintiff's injuries were the result of a mere accident there could be no recovery. It cited Miller v. Alvey, Ind. 207 N.E.2d 633, where the use of the phrase pure accident in a charge was held to be error. In the Miller case, the court said at page 636: "In a present day action based upon negligence the plaintiff *490 must show his injury was proximately caused by the defendant's negligence, and the defendant under a pleading equivalent to a general denial may show any circumstance which rebuts the allegations of negligence directed to him or which concerns their causal effect. The expression `unavoidable accident' or `pure accident' is not an affirmative defense and has no particular connotation in modern pleading of negligence cases. Such terminology adds nothing to the issues properly before the court or jury and as the expressions are ambiguous and particularly confusing to lay jurors, their use in instructions is undesirable and unwise * * *."
We subscribe to these sentiments and do not endorse the use of these terms. Taken by itself, the statement here of the trial justice on mere accident was incorrect and erroneous. However, a charge to a jury is to be considered in its entirety, and in the instant case the trial justice gave clear instructions on the issues of negligence, proximate cause and the pertinent law to be applied by the jury to the facts of the case. We are convinced that the jury in this particular case was not misled or confused by the erroneous statement of the law and that the statement was harmless error.
The bill of exceptions filed by the plaintiff lists an exception of the plaintiff to the denial of the trial justice to charge the jury in accordance with her request. Such an exception also appears in the transcript. Examination of the record shows beyond question that the only requests to charge in this matter were made by defendant. The plaintiff in her brief and argument before us now wishes this court to consider her exception to be one taken to the granting of defendant's request to charge.
This we refuse to do. We cannot on the state of this record speculate as to what transpired on this particular facet of the case in the trial court. No timely motion was made before us by the plaintiff pursuant to G.L. 1956, § 9-24-17, to amend her bill of exceptions or the transcript of testimony. Further examination of the transcript shows that certain corrections were made therein when it was allowed by the trial justice pursuant to G.L. 1956, § 9-24-20. For these reasons this exception is overruled.
In each case the plaintiff's exceptions are overruled, and each case is remitted to the superior court for entry of judgment on the verdict.
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219 A.2d 122 (1966)
David E. COSTA
v.
CARS, INC.
Eq. No. 3240.
Supreme Court of Rhode Island.
April 26, 1966.
Charles H. Anderson, Providence, for petitioner.
Worrell & Hodge, Eldridge H. Henning, Jr., Providence, for respondent.
PAOLINO, Justice.
This is an employee's petition to review a decree entered in an original petition for benefits by the workmen's compensation *123 commission and affirmed by this court in Costa v. Cars, Inc., 96 R.I. 396, 192 A.2d 1. The case is now before us on the appeals of both parties from a decree of the full commission affirming a decree entered by the trial commissioner.
The petitioner filed his original petition for benefits under the act on December 2, 1959; the testimony therein was concluded on September 5, 1961, but the trial commissioner did not enter his decision until November 3, 1962, nor his decree based thereon until November 5, 1962; an appeal was taken by respondent and on January 29, 1963 the full commission entered a decree affirming the decree of the trial commissioner; on June 20, 1963 we filed our decision in Costa, supra, denying and dismissing respondent's appeal and affirming the decree entered by the commission in that proceeding.
The decree entered on November 5, 1962 contained specific findings of fact describing the nature and extent of petitioner's injuries and setting forth three periods of incapacity for work resulting therefrom, the last incapacity ending on June 16, 1961.[1]
On August 27, 1963 petitioner filed the instant petition to review the decree entered on November 5, 1962. The hearings on this petition were held at various times during the period between December 3, 1963 and April 24, 1964, the record thereof consisting of testimonial evidence and medical exhibits. Thereafter the trial commissioner entered a written decision and on July 2, 1964 entered a decree based thereon which contained the following pertinent findings of fact:
"1. That the petitioner has failed to prove by a fair preponderance of the reasonable evidence that any incapacity for work either total or partial that he suffered during April 27, 1962, to May 29, 1962, January 5, 1963 to January 12, 1963, and February 10, 1963 to March 1, 1963, had any connection with or flowed from the original injury for which the respondent is connected.
"2. That on October 1, 1963, however, the petitioner had a return of incapacity solely as a result of the original injury set forth and described in the decree which is presently being reviewed.
"3. That said incapacity was total from October 2, 1963 to October 22, 1963, the date that he was at the Miriam Hospital but that since October 22, 1963 the petitioner has only been partially incapacitated for work."
Both parties appealed to the full commission. After considering the appeals the commission entered a decree dated February 3, 1965 affirming the decree of the trial commissioner. The case is before us, as already stated, on the appeals of both parties from the commission's decree.
The petitioner contends in substance that there is no evidence to support the negative findings of fact in paragraph 1 of the trial commissioner's decree and that the decree is therefore against the law. The respondent attacks the legality of the findings in paragraphs 2 and 3 of such decree and, in addition, challenges the authority of the *124 commission to inquire prior to November 5, 1962, the date of the entry of the decree being reviewed.
We shall first consider respondent's contention that the commission lacked authority to inquire as to the alleged incapacity during the period between April 27, 1962 and May 29, 1962, a period of subsequent to September 5, 1961, the date of the conclusion of the hearing in the original petition but prior to entry of the decree therein, which for some unexplained reason did not occur until November 5, 1962. It relies on Ottone v. Franklin Process Co., 76 R.I. 431, 71 A.2d 780, Trudeau v. United States Rubber Co., 92 R.I. 328, 168 A.2d 460, and Balcom v. Providence Sheraton Corp., R.I., 201 A.2d 913.
The review of agreements and decrees is governed by G.L. 1956, § 28-35-45, which, so far as pertinent, provides that "At any time * * * after the date of the entry of any decree concerning compensation, and if compensation has ceased thereunder, within ten (10) years thereafter, any * * * decree may be from time to time reviewed by the workmen's compensation commission * * * upon the ground that the incapacity of the injured employee has diminished, ended, increased or returned * * *."
In Ottone, supra, 761 R.I. at page 436, 71 A.2d at page 783, the court held:
"By establishing the date of the decree on the last petition for review as the starting point for any later inquiry as to whether the employee's incapacity has ended, diminished or increased we avoid the possibility of repeated reviews of facts once passed upon and decided. Such a possibility necessarily exists if in circumstances like the instant cases an unsuccessful petitioner may file another petition for review of the original agreement, order or decree fixing compensation."
Ottone was decided under a prior statute, but it was cited as controlling in Trudeau which was decided under the present act. In Trudeau, 92 R.I. at page 331, 168 A.2d at page 462, the court stated:
"The status of the parties is now established by the existing preliminary agreement under which petitioner is receiving total disability compensation. Any petition for review must necessarily be addressed to that agreement."
Since an agreement has the force and effect of a decree, it follows that Trudeau applies to decrees as well as to agreements. In Balcom, the court applied the principle of law established by Ottone and approved in Trudeau.
The rule stated in Ottone and Trudeau is well grounded and sound. Our concern, however, is not with the statement of the rule, but with its application. The factual situations in Ottone and Trudeau are materially distinguishable from those in the case at bar. The facts in the instant case seem to present a novel question; although the testimony on the hearing of the original petition was concluded on September 5, 1961, the decree of the trial commissioner was not entered until fourteen months later on November 5, 1962.
Although we believe that orderly procedure would be better served by the filing of a motion to reopen the proceedings prior to the entry of the trial commissioner's decision if a petitioner has additional evidence to present prior to such time, it is our opinion that in the peculiar circumstances of this case the interests of justice require that where, as here, the trial commissioner had not decided the merits of the controversy within ten days after the hearing in compliance with G.L. 1956, § 28-35-27, we treat the decree entered on November 5, 1962 as relating back to September 5, 1961, the date on which the testimony was concluded.
We hold, therefore, that the rule established in Ottone and Trudeau is not applicable to the facts in this case and that the *125 commission was warranted in considering facts occurring after the conclusion of the hearing but prior to the date of the entry of the November 5, 1962 decree in inquiring as to whether petitioner's incapacity had ended, diminished, increased or returned. The starting point in the case at bar was September 5, 1961, not November 5, 1962. The respondent's contention that petitioner's claim should be limited to the period subsequent to August 27, 1963, the date on which the instant petition was filed, is without merit and requires no further consideration.
We come now to the questions whether the findings of fact are supported by competent evidence. We shall first consider petitioner's contention that there is no evidence to support the findings in paragraph 1 of the trial commissioner's decree that petitioner has failed to prove by a fair preponderance of the evidence that his incapacity for work during the periods in question was connected with the original injury he sustained while in respondent's employ.
It is well settled that in review proceedings petitioner has the burden of proving that incapacity due to injury has increased or returned. Gray v. Kagan, 87 R.I. 264, 140 A.2d 269. It is also well established that findings of fact made by the commission, whether positive or negative, if supported by competent evidence are conclusive in the absence of fraud. DeFusco v. Ochee Spring Water Co., 84 R.I. 446, 124 A.2d 867. Under our act we are not permitted to pass on the weight of the evidence. Larose v. Warwick Brass Foundry, Inc., R.I. 198 A.2d 668. The petitioner has the further burden of persuading this court, on appeal, that there is no evidence to support the commission's findings. Blanchette v. Lucia Trucking, Inc., R.I. 209 A.2d 56.
In his written decision the trial commissioner, after carefully reviewing the evidence including the medical testimony, did not question the fact that petitioner had intermittent back trouble at various times causing him to remain out of work and requiring hospitalization. However, he concluded that petitioner had not proven by a fair preponderance of the evidence that the periods of incapacity and the hospitalizations in question were connected with the injury he sustained while in respondent's employ. Indeed he found that prior to October 1, 1963, petitioner's incapacity for work and hospitalizations were caused by intervening incidents unconnected with his employment with respondent.
The negative finding of fact that petitioner had failed to sustain his burden of proof was based on the weight which the commission gave to petitioner's evidence, as well as to the presence of evidence indicating that intervening incidents had occurred which influenced the commission's findings as to the cause of the hospitalizations and periods of incapacity claimed by petitioner. After carefully reading the transcript and examining the exhibits we cannot say that petitioner has sustained his burden of proof with respect to the findings in paragraph 1 of the trial commissioner's decree, as affirmed by the full commission.
We come now to respondent's contention that the findings of fact included in paragraphs 2 and 3 of the trial commissioner's decree, which were affirmed by the decree of the full commission, are contrary to law. We do not agree with respondent. The trial commissioner found as a fact that the incapacity and hospitalization commencing on October 2, 1963 were caused, not by an intervening incident or episode, but by the original injury sustained by petitioner while in respondent's employ. This finding is supported by petitioner's testimony and by the medical evidence and is therefore conclusive.
Paragraph 2 of the November 5, 1962 decree contains a finding of fact that petitioner's incapacity for work ended on June 16, 1961. The testimony in the hearing on the original petition was concluded on *126 September 5, 1961 and we have held that the decree entered on November 5, 1962 relates back to September 5, 1961. On this record we are constrained to conclude that the petitioner has shown a return of incapacity on October 1, 1963 and consequently a change from what it was on September 5, 1961. See Balcom, supra. In our judgment there is no merit in respondent's contention that the findings in paragraphs 2 and 3 of the decree are contrary to law.
The appeals of both parties are denied and dismissed, the decree appealed from is affirmed, and the cause is remanded to the workmen's compensation commission for further proceedings.
NOTES
[1] "1. On April 23, 1959 petitioner sustained a neck sprain and low back strain while using a long wrench in the performance of his usual work as an automobile repair man in the employ of the respondent.
"2. On account of such injuries he was totally incapacitated for the period beginning April 24, 1959 and ending June 5, 1959; for the period beginning August 9, 1959 and ending September 1, 1959; and for the period beginning April 17, 1961 and ending June 16, 1961.
"3. Other than during the above periods petitioner was not incapacitated and was able to do his regular work as an automobile repair man.
"4. Respondent had knowledge of such incident and injuries.
"5. Petitioner's average weekly wage was 869.75."
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893 S.W.2d 773 (1995)
319 Ark. 640
Jeanne STEVENS, Appellant,
v.
STATE of Arkansas, Appellee.
No. CR 94-296.
Supreme Court of Arkansas.
February 27, 1995.
*774 Jeanne Stevens, pro se.
J. Brent Standridge, Asst. Atty. Gen., Little Rock, for appellee.
DUDLEY, Justice.
Appellant was convicted in municipal court of speeding, operating a motor vehicle with a suspended driver's license, and operating a motor vehicle without proof of financial responsibility. She appealed to circuit court where she was again convicted of each of the misdemeanors. She appealed to the court of appeals, and it certified the case to this court as a case involving the constitutionality of statutes. We affirm the convictions.
Appellant challenges the constitutionality of sections 27-22-104(a) and 27-16-303(a)(1) of the Arkansas Code Annotated of 1987. The first of these two statutes requires the driver of a motor vehicle either to have a minimum amount of liability insurance or to show financial responsibility, and, if he is arrested and can show neither, his vehicle registration will be suspended and its license impounded. See Ark.Code Ann. § 27-22-104(c)-(d) (Repl.1994). The second statute provides that a person may not operate a motor vehicle while his driver's license is suspended. Ark.Code Ann. § 27-16-303(a)(1). Appellant was previously involved in an accident and was convicted of a traffic misdemeanor. Her license had been revoked, and she did not have insurance and could not show financial responsibility. The two statutes operated together to prevent appellant from lawfully operating a motor vehicle. She contends that the statutes, taken together, constitute an abridgment of her rights under the Fourteenth Amendment, therefore, the convictions under these two statutes must be reversed.
We have already held that the operation of a motor vehicle upon a public road is a privilege and not a right and that the State may exercise its police powers to regulate that privilege. Satterlee v. State, 289 Ark. 450, 711 S.W.2d 827 (1986); Jones v. City of Newport, 29 Ark.App. 42, 780 S.W.2d 338 (1989). This power is most often recognized for the purpose of promoting safety. See Hess v. Pawloski, 274 U.S. 352, 47 S. Ct. 632, 71 L. Ed. 1091 (1927).
*775 Appellant contends that Satterlee and Jones are not in point because those cases did not involve insurance, and, even if they are in point, they are in violation of the Fourteenth Amendment because it provides, "No State shall make or enforce any law which shall abridge the privileges ... of any citizen." U.S. Const. amend. 14, § 1 (emphasis added.)
The statutes together have the effect of making drivers financially responsible, at least in part, for damages they might negligently inflict upon others. Damages in this context include the cost of medical care and rehabilitation. In this manner the statutes promote public well being and safety and come within the State's police power. In addition, it is generally recognized that police powers regulating the operation of motor vehicles are applicable to areas other than safety. See Jeffrey T. Walker, Annotation, Validity And Application Of Statute Or Regulation Authorizing Revocation Or Suspension Of Driver's License For Reason Unrelated To Use Of, Or Ability To Operate, Motor Vehicle, 18 A.L.R. 5th 542 (1994). The statute at issue originated as Act 988 of 1991 as "an attempt to enhance the enforcement of the motor vehicle licensing law" the lack of which had resulted in "lost revenues to schools and the state and local governments." Act 988 of 1991, § 9 (emergency clause). The State may impose reasonable requirements on the licensure of privileges in order to collect taxes. See Wometco Servs., Inc. v. Gaddy, 272 Ark. 452, 616 S.W.2d 466 (1981).
The Supreme Court of the United States has approved the regulation of a privilege where there is a legitimate state interest. For example, a New Orleans ordinance was upheld which prohibited pushcart food sales in the French Quarter unless the vendor had eight years experience. City of New Orleans v. Dukes, 427 U.S. 297, 96 S. Ct. 2513, 49 L. Ed. 2d 511 (1976). The State has a legitimate interest in providing that persons who operate motor vehicles have the financial ability to pay for damages they might cause.
Appellant's next assignment of error is that the convictions should be reversed because the trial court interrupted her as she tried to explain that she could not afford to purchase liability insurance because she was indigent. Appellant cites no authority and actually makes no argument for the point. We have long held that assignments of error, unsupported by convincing argument or authority, will not be considered on appeal unless it is apparent without further research that they are well taken. Dixon v. State, 260 Ark. 857, 545 S.W.2d 606 (1977).
In her last point of appeal, appellant states that the speedometer in her car reflected that she was driving exactly forty miles per hour when she was stopped for exceeding forty miles per hour, but she does not assign a ruling by the trial court as error. Our general rule is that we will not reverse a case unless there has been some erroneous trial court ruling. There are limited exceptions, but none of them are applicable to this case. See Wicks v. State, 270 Ark. 781, 606 S.W.2d 366 (1980).
Affirmed.
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893 S.W.2d 550 (1994)
Rosalinda ROMERO, Appellant,
v.
The STATE of Texas, Appellee.
No. 06-94-00002-CV.
Court of Appeals of Texas, Texarkana.
Submitted August 15, 1994.
Decided November 4, 1994.
Rehearing Overruled February 8, 1995.
David L. Joers, Crutsinger & Booth, Dallas, for appellant.
Dale Jensen, Asst. Dist. Atty., Dallas, for appellee.
Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.
OPINION
CORNELIUS, Chief Justice.
This is a drug forfeiture case. In October of 1990, Rosalinda Romero participated in two sales of cocaine to undercover police officers. Romero and an acquaintance arranged with an undercover officer for the sales at Romero's house at 7318 Thurston Street in Dallas.
*551 Romero was tried for two offenses of delivery of cocaine but was only convicted for one two-ounce cocaine sale on October 5. She was tried in November of 1991 and was convicted and sentenced to five years' probation. Before trial the State filed a notice of seizure and intended forfeiture of Romero's house and lot. The State alleged that the property was contraband subject to forfeiture under Chapter 59 of the Texas Code of Criminal Procedure because it was used in the commission of the felony offense of delivery of cocaine. See Tex.Code Crim.Proc. Ann. art. 59.01(2)(B) (Vernon Supp.1994). In the forfeiture proceeding, the State filed a motion for summary judgment, which the trial court initially granted. The court thereafter set the summary judgment aside and granted Romero's motion for new trial. Romero then moved for summary judgment, contending that the forfeiture would amount to double jeopardy, citing United States v. Halper, 490 U.S. 435, 109 S. Ct. 1892, 104 L. Ed. 2d 487 (1989). Although the record does not contain the court's order, according to Romero's brief the trial court denied her motion.
On June 28, 1993, after the case was set for trial, Romero and the State's attorney executed a settlement agreement in which the State agreed to release Romero and the property from all claims and liabilities in exchange for her agreement to sell the house and property and pay half of the proceeds to the State. On appeal and below Romero claims that the appraised value of the house and lot is a total of $46,540.00.[1] The settlement agreement was conditioned on its approval by the trial court and also on the trial court's granting of the parties' joint motion for dismissal. Although the record does not so indicate, the court apparently approved the settlement agreement. On June 28, 1993, the court dismissed the cause of action with prejudice.
On July 28, 1993, Romero filed a motion to modify the judgment and vacate the settlement agreement. Romero asserted that on June 28, 1993, the same day that the settlement agreement was signed, the United States Supreme Court issued its opinion in Austin v. United States, 509 U.S. ___, 113 S. Ct. 2801, 125 L. Ed. 2d 488 (1993), in which it held that forfeiture of real property in cases such as Romero's is punishment. She argued that under Austin a separate forfeiture proceeding after the criminal conviction amounts to multiple punishments for the same offense and violates the double jeopardy prohibition. She also contended that the settlement agreement she made was contrary to public policy, was induced by mutual mistake, was without consideration, and was unconscionable. She asked the trial court to modify the judgment and set aside the settlement agreement. The court held a hearing on Romero's motion. The State filed no counteraffidavits or written response, the hearing consisted only of argument of counsel, no evidence was presented, and the hearing was not recorded by the court reporter.
There being no written order regarding Romero's motion signed within seventy-five days of the judgment, her motion was overruled by operation of law. Tex.R.Civ.P. 329b(c), (g).[2]
In Romero's sole point of error, she says the trial court erred in failing to grant her motion to reform the order of dismissal and in failing to set aside the settlement agreement. Her basis for this argument is essentially the same as argued belowthat under Austin the forfeiture of her property constitutes double jeopardyand therefore the settlement is voidable because it is against public policy, was induced by mutual mistake, lacks consideration, and is unconscionable.
*552 Because Romero's motion to set aside the settlement agreement was equivalent to a motion for new trial, its denial is reviewable under an abuse of discretion standard, the same as the denial of a motion for new trial. See Tex.R.Civ.P. 329b(g); Champion Int'l Corp. v. Twelfth Court of Appeals, 762 S.W.2d 898, 899 (Tex.1988). The court's decision will not be disturbed unless it acted in an arbitrary or unreasonable manner and without reference to guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986). The procedural history of this case is important because, even if we decide that under current law the forfeiture here violates the Double Jeopardy Clause, that does not necessarily render the trial court's denial of Romero's motion an abuse of discretion.
As noted, Romero argues that in Austin the Supreme Court held that forfeiture is punishment. The Court in Austin, however, did not address forfeiture and double jeopardy, but rather forfeiture and the Excessive Fines Clause of the Eighth Amendment. Halper addressed the issue of whether a civil penalty imposed in a separate proceeding after the imposition of criminal punishment constituted double jeopardy. The Court in that case said the penalty would constitute double jeopardy only in the rare case where a fixed penalty is overwhelmingly disproportionate to the damages caused by the crime and is therefore punitive rather than remedial. There are several courts of appeals decisions that have addressed the issues of forfeiture and double jeopardy. See Fant v. State, 881 S.W.2d 830 (Tex.App.Houston [14th Dist.] 1994, no pet. h.); Ward v. State, 870 S.W.2d 659 (Tex.App.Houston [1st Dist.] 1994, pet. ref'd); Walker v. State, 828 S.W.2d 485 (Tex.App.Dallas 1992, pet. ref'd); Ex parte Rogers, 804 S.W.2d 945 (Tex.App. Dallas 1990, no pet.). Only Fant, where the court in a split decision held that a forfeiture amounted to double jeopardy, was decided after the trial court decision here. Ward, Walker, and Rogers, which were in existence when the settlement here was made, all held that forfeiture did not constitute double jeopardy in the context of the facts existing in those cases because the forfeiture was remedial. Those decisions were clearly the law at the time the settlement agreement was executed. Even assuming, then, that under Austin forfeiture may constitute double jeopardy, that does not necessarily mean the trial court abused its discretion in this instance. At the time the court denied Romero's motion, the law was well established that civil forfeiture of drug contraband was remedial and double jeopardy was not violated unless the civil sanction was so disproportionate to the damage caused by the crime that the sanction became punitive rather than remedial. See Ward v. State, 870 S.W.2d at 662-63; Walker v. State, 828 S.W.2d at 490; Ex parte Rogers, 804 S.W.2d at 948-51. Indeed, Romero concedes that before Austin civil forfeiture proceedings were considered remedial. In Rogers, a case cited with approval by both Ward and Walker, the court noted that courts generally took a broad view of damages suffered by the government:
The ravages of drugs upon our nation and the millions the government is being forced to spend upon investigation and enforcementnot to mention the costs of drug-related crime and drug abuse treatment, rehabilitation, and preventioneasily justify a recovery in excess of the strict volume of the property actually [forfeited].
Ex parte Rogers, 804 S.W.2d at 950 (quoting United States v. A Parcel of Land With A Building Located Thereon, 884 F.2d 41, 44 (1st Cir.1989)). Based on this broad view, the Rogers court found that forfeiture of $6,406.00 cash, two cars, one mobile home, one television, and two safes, all property purchased by proceeds from drug sales, was not so disproportionate to government expenses and the damage caused by Rogers' alleged drug distribution activities as to render the forfeiture nonremedial.
Using this broad view of the remedial nature of forfeiture, we conclude that the agreed settlement here does not violate the prohibition against double jeopardy. Romero was convicted of delivery of cocaine. The conviction was the result of an undercover operation by the Dallas police department involving several officers. The time and expense involved in such an operation, plus the *553 general damages to society resulting from drug trafficking, are quite substantial. We conclude that the forfeiture of one-half of a $46,000.00 house used as the base for cocaine trafficking is not so disproportionate to the damage and expense caused by the crime as to be considered punitive rather than remedial. Because the forfeiture action could be considered remedial, it would not violate the double jeopardy prohibition. Thus, given the law as it existed at the time of the settlement and the nature of the case, it was not unreasonable or arbitrary for the trial court to conclude that the settlement was supported by consideration, that neither side was laboring under a misconception of the law, and that the agreement was neither unconscionable nor against public policy.
Even if the forfeiture became voidable under a contemporaneous or subsequent change of law, that would not affect the validity of this settlement agreement. One may not invoke equity to set aside a contract made in reliance on settled law announced by a court decision because the law is subsequently changed. Pollard v. Steffens, 161 Tex. 594, 343 S.W.2d 234, 238 (1961).
Because the settlement agreement was based on accepted law, and because neither Austin v. United States nor any other case had changed the law at the time the settlement was made, the trial court's decision was not arbitrary or unreasonable and did not constitute an abuse of discretion. Downer v. Aquamarine Operators, Inc., 701 S.W.2d at 241.
The judgment of the trial court is affirmed.
GRANT, Justice, dissenting.
Rosalinda Romero owns a small home in Dallas, which she inherited from her mother. Romero works as a short-order cook and earns $6.00 per hour. There are no allegations that this home was derived from drug trafficking or purchased with drug trafficking money. The basis of the forfeiture was the sale of two ounces of cocaine to Romero's boyfriend in her presence. According to the undisputed affidavits, except for this transaction, neither the house nor the lot had ever been a tool of drug trafficking, center of drug distribution, drug laboratory site, or the site of any drug cultivation.
The State claims to be enforcing a contract. This contract was made under the threat of taking all of her home instead of one-half. This is an unconscionable agreement. Forfeitures are not favored by the law. Even before United States v. Halper, 490 U.S. 435, 109 S. Ct. 1892, 104 L. Ed. 2d 487 (1989), the forfeiture could not be so extreme that it subjects the offender to a sanction overwhelmingly disproportionate to the damage he has caused.
I respectfully dissent.
NOTES
[1] In her affidavit in support of her summary judgment, signed November 20, 1992, Romero appears to argue that the house is actually worth less than the appraised value, stating that the house is in need of repairs and that she had moved out of the house in August of 1992. She does state that she intends to move back into the house if the trial court lets her keep it.
[2] The trial court signed an order overruling the motion in an order dated September 26, 1993, after the motion had already been overruled by operation of law.
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219 A.2d 579 (1966)
WARNER STORES COMPANY, a corporation of the Commonwealth of Pennsylvania, Defendant Below, Appellant,
v.
E. R. SQUIBB & SONS, INC., a corporation of the State of Virginia, Plaintiff Below, Appellee.
Supreme Court of Delaware.
May 4, 1966.
Nathan P. Michlin, Wilmington, and Sydney Finkelstein, Philadelphia, Pa., for defendant below, appellant.
*580 C. Waggaman Berl, Jr., of Berl, Potter & Anderson, Wilmington, for plaintiff below, appellee.
WOLCOTT, C. J., and CAREY and HERRMANN, JJ., sitting.
HERRMANN, Justice:
This appeal brings up again the question of the constitutionality of the "non-signer" provisions of the Delaware Fair Trade Act.[1]
The plaintiff, a drug manufacturer, brought an action seeking to enjoin the defendant, engaged in the retail drug business, from selling the plaintiff's products at less than the prices established by the plaintiff under the Delaware Fair Trade Act. The defendant was not a party to any contract with the plaintiff under the Act. The Chancery Court granted the injunction and the defendant appeals.
The principal arguments of the defendant are that the Fair Trade Act is unconstitutional because (1) price regulation is a legislative power which may not be delegated lawfully to private persons, and (2) price regulation is not a valid exercise of the police power.
Both of these propositions were considered and rejected by this Court in General Electric Co. v. Klein, 34 Del. Ch. 491, 106 A.2d 206 (1954).[2] We are of the opinion that no sufficient reason has been shown to warrant a reversal of that decision.
The defendant urges us to follow the recent action of the Pennsylvania Supreme Court which reversed its earlier holding and concluded that the Pennsylvania Fair Trade Act is unconstitutional as an unlawful delegation of legislative function. See Olin Mathieson Chemical Corp. v. White Cross Stores, 414 Pa. 95, 199 A.2d 266 (1964). We recognize that the nature of the topic leaves room for contrariety of judicial opinion; but we are content with the correctness of the views of this Court as stated in the Klein case, and we adhere thereto.
Three a priori arguments are made by the defendant: (1) The Act actually does not protect a manufacturer's good will; (2) the Act drastically harms the consumer; and (3) the Act gives legal sanction to unlawful price fixing. These contentions, addressed to the wisdom and the efficacy of the Act, are for the Legislature, not the courts. Any modification or rescission of the Act must remain for decision by the General Assembly.
Finally, the defendant contends that certain of the plaintiff's products were not within the coverage of the Act because not in "free and open competition." See 6 Del. C. § 1902. This contention is based upon the fact that, as to such items, the plaintiff's salesmen dealt directly with physicians who recommended the items to their patients; that, in acting upon such recommendation, the patient-consumer was not really exercising a freedom of choice among competing products.
There is evidence, as to which there is little dispute, showing that products of the same general class manufactured by others were regularly displayed for sale on *581 druggists' shelves, together with the plaintiff's products and at comparable prices. The fact that the main channel of advertising communication to the consumer may have been through a physician does not, of itself, prevent the items advertised from being in free and open competition, within the meaning of the Act. The Chancery Court found, as a matter of fact, that the plaintiff established that the products here involved "are sold in open competition with other commodities of the same general class." After review of the record, we conclude that there is sufficient evidence to support this finding.
Finding no error in the judgment below, it is affirmed.
NOTES
[1] 6 Del.C. § 1906 provides:
"§ 1906. Advertising, offering or selling commodity below minimum price
"Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of this chapter, whether the person so advertising, offering for sale or selling is or is not a party to the contract, is unfair competition and is actionable at the suit of any person damaged thereby."
[2] While the police power facet clearly appears in the reported opinion in Klein (see text of the first certified question), the delegation of legislative power aspect is not as clear on the face of the opinion. An examination of the briefs in the Klein case satisfies us, however, that the latter question was presented and considered.
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989 F. Supp. 430 (1997)
John F. RUFFALO, Plaintiff,
v.
CUC INTERNATIONAL, INC., et al., Defendants.
No. 3:96CV36(JBA).
United States District Court, D. Connecticut.
September 29, 1997.
*431 Robert L. Keepnews, Pepe & Hazard, Southport, CT, Vicki A. Hagel, Charles E. Butler, Smith, Katzenstein & Furlow, Wilmington, DE, for Plaintiff.
David S. Poppick, Matthew Robert Asman, Epstein, Becker & Green, P.C., Stamford, CT, Sheldon N. Sandler, Young, Conaway, Stargatt & Taylor, Wilmington, DE, for Defendants.
RULING ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [DOC. 23]
ARTERTON, District Judge.
This is a case alleging age discrimination, in violation of 29 U.S. § 621 et seq., and breach of contract, promissory estoppel, quantum meruit, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing in violation of Connecticut common law. This matter is before the court on defendant's motion for summary judgment.
Legal Standard
In a motion for summary judgment, the burden is on the moving party to establish that there are no genuine issues of material fact in dispute, and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202 (1986). Once the moving party has met its burden, "the non-moving party, *432 in order to defeat summary judgment, must come forward with evidence that would be sufficient to support a jury verdict in his favor." Goenaga v. March of Dimes Birth Defects Foundation, 51 F.3d 14, 18 (2d Cir. 1995); Celotex Corp. v. Catrett, 477 U.S. 317, 332, 106 S. Ct. 2548, 2551, 91 L. Ed. 2d 265 (1986). If, as to the issue on which summary judgment is sought, there is any evidence in the record from which a reasonable inference could be drawn in favor of the opposing party, summary judgment is improper. Finley v. Giacobbe, 79 F.3d 1285, 1291 (2d Cir. 1996). However, "a party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.'" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986) (quoting First Nat. Bank of Ariz. v. Cities Service Co., 391 U.S. 253, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1968)). In deciding a motion for summary judgment, all reasonable inferences and any ambiguities must be drawn in favor of the non-moving party. Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir.1990).
Discussion
1. Age Discrimination Claim
In the absence of direct proof of age discrimination, actions brought under the Age Discrimination in Employment Act must be analyzed under the shifting burden requirements of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). See also Maresco v. Evans Chemetics, 964 F.2d 106, 110 (2d Cir.1992) (McDonnell Douglas test applies to ADEA cases). The plaintiff must first establish a prima facie case by showing that 1) the plaintiff was a member of a protected age group, 2) he was qualified for the position in question, 3) he was not given the position, and 4) the circumstances under which he was denied the position give rise to an inference of discrimination. Second, if the plaintiff establishes the prima facie case, the burden then shifts to the defendant to articulate a non-discriminatory, legitimate[1] business reason for the alleged discriminatory action. If the defendant can proffer such a reason, the plaintiff then must carry the ultimate burden of proving that the defendant's proffered reason was pretextual, and the real reason was discrimination.
Generally in ADEA actions, the burden of proof of the prima facie elements is de minimis. Nonetheless, defendants contend that plaintiff has failed to show that he was qualified for the position in question.
The position in question was that of the sales manager of AutoVantage, a position formerly held by Andrew Kates. At the time that Mr. Kates' job became available, Mr. Ruffalo, a fifty-six-year old man, was working as a sales representative for AutoVantage. According to Mr. Ruffalo's affidavit, he was only persuaded to take the sales job with AutoVantage in the first place when John Fullmer, CUC's Chief Marketing Officer, promised him that if and when the sales manager's job became available, "the sales representative `with the best numbers'" would replace Kates. Ruffalo Aff., ¶ 9. In other words, the sales representative who had made the most sales at the time that the sales manager's job became available would supposedly replace Kates. It is not disputed that Ruffalo was the sales representative with the most sales. Fullmer disputes this contention, and claims that he told Mr. Ruffalo, that
there were many factors that were considered, and it would be an overall evaluation of the person, high sales numbers, ability to manage a sales force, attention to back-end details, writing ability, motivation and getting along with people, among other things. I never told Ruffalo that the next AutoVantage Sales Manager after Kates *433 would be the person with the best sales numbers.
Fullmer Aff., ¶ 4. When Kates' job did become available after Fullmer became dissatisfied with Kates, Sandi Finn, the Director of AutoVantage Marketing Department was ultimately selected to replace him. Fullmer explains that he chose Finn because he
decided that AutoVantage credit union marketing and sales needed someone who paid attention to details, who could interact with others and who could effectively communicate and manage. In particular, the position required someone who was detail-oriented in setting up procedures that would make the operations flow properly, and someone who possessed administrative, management and marketing skill necessary to carry out the duties associated with the position....
Ruffalo simply lacked the managerial, administrative and marketing experience I believed was necessary to carry out the duties associated with that position. Ruffalo was not detail oriented, as he even conceded at his deposition. Also, he was sloppy on the back-end.
Fullmer Aff., ¶ 7, 11. Ruffalo disputes Mr Fullmer's proffered explanation for the selection of Finn as the new sales manager. He points out that "Fullmer has said repeatedly during sales meetings, `numbers mean everything' and Kates had not signed a single credit union.... I knew Finn only as a person employed out of the Houston office who experience was in `back end' work. She had not, to my knowledge, ever supervised a sales force or done sales herself...." Ruffalo Aff., ¶ 22-23. Andrew Kates supports Ruffalo's contention that Fullmer's explanation for hiring Finn does not make sense:
Fullmer's major criticism to me of my management of the sales force was that I was too wiling to work in the back end and not willing enough to get out front and sell myself.... Finn and I had very similar sets of skills. That is one reason why, when Fullmer announced he was letting me go, I was so surprised to learn that Finn was replacing me. I felt that Finn's strengths were my strengths and Finn's weaknesses were my weaknesses, and if Fullmer really thought he needed a different kind of person in the position he wasn't going to find it in Finn.
Kates Aff., ¶¶ 16-18. Rather, plaintiff argues that Fullmer's proposed qualifications for the sales manager's job, which help explain the hiring of Finn, a 34-year-old woman, were actually post-hoc rationalizations covering up the fact that the true reason for passing-over Mr. Ruffalo was age discrimination.
In a motion for summary judgment, it is inappropriate for the court to render decisions of fact. Rather, the court need only identify the existence of material factual disputes to be decided. Here, defendants contend that plaintiff was not qualified for the job in question, and so does not prove his prima facie case. The record, however, shows that there is a genuine factual dispute on this very point. Whether being a "backend," detail-oriented person was in fact the essential qualification for the job, or merely a pretext to hire a younger person, appears to be at the heart of this case.
Moreover, this hiring decision was made against the back-drop of several questionable comments that give could rise to an inference of age discrimination. During a Christmas party at Fullmer's home, Fullmer allegedly had other guests feel Ruffalo's arm, commenting that Ruffalo was in good shape for his age. Ruffalo Aff., ¶ 14. At a sales meeting, Mr. Fullmer allegedly announced that he approved of plaintiff's haircut because it made him look young. Ruffalo Aff., ¶ 15. Finally, at another meeting, Fullmer engaged Mr. Ruffalo in a conversation about what type of vitamins one should take to reduce wrinkles. Ruffalo Aff., ¶ 16. Generally, "stray comments" without a demonstrated nexus to the complained of personnel actions will not defeat the employer's motion for summary judgment. See., e.g., Rush v. McDonald's Corp., 966 F.2d 1104, 1106 (7th Cir.1992); Smith v. Firestone Tire & Rubber Co., 875 F.2d 1325, 1329-30 (7th Cir.1989). Here, however, Mr. Fullmer's claim that Mr. Ruffalo did not perform up to expectations puts squarely at issue the nexus of his comments and his promotion of younger Finn as demonstrative of the factual dispute over *434 pretextual motivation. These arguably inappropriate comments are not only pejorative of age, but they were also made by the maker of the decision in dispute. Based on the foregoing, there must be an assessment of the comments in full context in order to determine what relationship, if any, they have to the disputed hiring decision.
Thus, plaintiff has shown that there are material factual disputes as to his age discrimination claim. Defendants' motion for summary judgment on this count must be denied.
2. Breach of Contract and Promissory Estoppel
Plaintiff additionally alleges that Fullmer's promise to him in the initial recruitment meeting, that the person with the most sales would take Kates' job, constituted a contract that has been breached. Plaintiff also claims that the promise gives rise to a claim of promissory estoppel. Defendants argue that the promise, if it was even made, was not sufficiently promissory or definitive to give rise to such liability. It is not for the court to decide the nature of the promise made, however. The Connecticut Supreme Court has stated that, "Absent a statutory warranty or definitive contract language, the determination of what the parties intended to encompass in their contractual commitments is a question of the intention of the parties, and an inference of fact." Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., 234 Conn. 1, 15, 662 A.2d 89 (1995). "[T]he question of whether statements are promissory should be considered as a question of fact..." Id. at 17 n. 6, 662 A.2d 89.
Defendants additionally contend that Ruffalo did not rely on Fullmer's alleged promise because he was merely taking the sales job to "hide out" until he could return to his previous company, Entertainment Publications. Whatever Mr. Ruffalo's ultimate intentions were, he has also alleged that he would not have taken the AutoVantage job but for Mr. Fullmer's promise, and that in reliance on this promise, he moved across country to take the job, and began construction on a new home. Ruffalo Aff., ¶ 9-10. A party need not stake all his future hopes on a promise to show reliance, merely that he incurred some sort of detriment in belief that the promise was true. Accordingly, defendants' motion for summary judgment is denied as to plaintiff's claims of breach of contract and promissory estoppel.
3. Quantum Meruit
Ruffalo further alleges that he is entitled to be compensated for the reasonable value of his services under the theory of quantum meruit. Defendants contend that this claims makes no sense as Ruffalo was paid all he was entitled to receive, and there was no implied contract that Ruffalo would be paid any compensation for the manager's job if he were to get it. Plaintiff argues that defendants misunderstand his claim, which is certainly understandable from the paucity of plaintiff's complaint allegations. Ruffalo is not arguing that he is entitled to compensation for the sales manager's job. Rather, that when he was hired, he was promised that he would be paid a salary plus commissions. After he took the job, Kates explained that the salary was not a salary, but a draw against future commissions. Thus, plaintiff argues, he is entitled to those commissions that were deemed to have been given to him in salary. In support of this proposition, Ruffalo offers his own affidavit testimony, as well as that of Mike Winter, another AutoVantage employee. Ruffalo Dep., ¶¶ 37-38; Winter Aff. ¶ 7. The salary arrangements agreed to at the time of Ruffalo's hire are questions of fact that must be determined. Accordingly, this issue is inappropriate for summary judgment.
4. Negligent Misrepresentation
Even an "innocent misrepresentation of fact `may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth.'" D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 217, 520 A.2d 217 (1987). "It is sufficient to allege that the representations contained false information." Id. at 218, 520 A.2d 217. Fullmer, as the decision maker, presumably had the means of knowing what criteria would be used by him for selecting *435 the next sales manager. Although it is clear in hindsight that the alleged statement by Fullmer regarding who would be hired as the next sales manager was false, a claim for negligent misrepresentation requires that the information have been false at the time it was given, not simply that the decision maker changed his mind. Defendant claims that plaintiff has not presented any allegation of present intent, other than the ultimate failure to follow-through on the alleged statement.[2] A plaintiff need not allege present intent to deceive, however, merely that the statement was false when made, and the maker had the means to know it was false.
Construing the facts in the light most favorable to the nonmoving party, however, Ruffalo has alleged facts that could imply that the statement was false when given. Ruffalo claims that when he confronted Fullmer about the promise to him, "Fullmer stated that he couldn't afford to lose his best sales person to sales management. While Fullmer agreed that was not fair to me, according to Fullmer `I had to do something with her,' obviously with reference to Sandi Finn." Ruffalo Aff., ¶ 27. These statements as Ruffalo recounts them, could give rise to the inference that Fullmer's primary concern all along was getting and keeping the best sales person, i.e., the person with the best numbers, in the sales department, and that he never intended to advance the best sales person to management. As Ruffalo laments in hindsight, "CUC had been lying to [him] all along and that the company never intended to honor any of its commitments" to him. Ruffalo Aff., ¶¶ 27-28. Thus, whether or not Fullmer knew at the time that he made the statement to Ruffalo that the statement was false is the subject of a factual dispute.
Negligent misrepresentation additionally requires reliance on the information given. The issue of reliance has been discussed elsewhere in this ruling. Mr. Ruffalo claims he would not have taken the job but for Fullmer's statements as to what the qualifications would be for the sales manager's position. He did take the job, and suffered a detriment as a result.
On this record, it cannot be said that there is no material issue of fact in dispute as to whether Fullmer's statement was false at the time it was made.
5. Breach of the Implied Covenant of Good Faith and Fair Dealing
In essence, the principle of the covenant of good faith and fair dealing "is the fulfillment of the reasonable expectations of the parties." Magnan v. Anaconda Indus., 193 Conn. 558, 572, 479 A.2d 781 (1984). "Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party...." Restatement (Second) of Contracts § 205 (1979) (quoted in Magnan, 193 Conn. at 566, 479 A.2d 781). It is a "rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended." Magnan, 193 Conn. at 567, 479 A.2d 781.
Defendants argue that the covenant is unavailable to plaintiff because plaintiff has other available remedies, and plaintiff does not allege "a demonstrably improper reason ... whose impropriety is derived from some important violation of public policy," as required by Sheets v. Teddy's Frosted Foods, 179 Conn. 471, 475, 427 A.2d 385 (1980). The defendants are misguided in their discussion of Sheets, which involved the remedies available to a discharged at-will employee, in the absence of a collective bargaining unit or other statutory remedies. In that case, the Connecticut Supreme Court approved a common law cause of action in tort for discharges "where the discharge contravenes a clear mandate of public policy." Sheets, 179 Conn. at 474, 427 A.2d 385. In Magnan v. Anaconda Indus., 193 Conn. 558, 479 A.2d 781, the Court also considered the reach of the implied covenant of good faith and fair dealing in the employment context.
*436 This case, however, is not about discharge of at-will employees, or importing the covenant of good faith and fair dealing into the at-will relationship. Rather, plaintiff is alleging that the statement by Fullmer gave rise to a separate contract, which was breached. Therefore, plaintiff need not allege any violation of public policy to prevail on his claim of breach of the covenant of good faith and fair dealing, merely that a contract existed and the expectations of the parties were not fulfilled. As the expectations of the parties and the existence of a contract in this case are the subject of considerable factual dispute, this issue is not ripe for summary judgment.
6. Defendant Comp-U-Card Services, Inc.
Based on defendants' representations that Comp-U-Card Services is an entirely separate entity from Comp-U-Card Division of CUC International, and plaintiff's acquiescence in this representation, Comp-U-Card Services is dismissed as a defendant in this action.
Conclusion
For the foregoing reasons, defendants' Motion for Summary Judgment [doc. 23] is hereby DENIED.
IT IS SO ORDERED.
NOTES
[1] The Second Circuit's opinion in Fisher v. Vassar, 114 F.3d 1332 (2d Cir.1997) (in banc), casts serious question on the limits of what is considered a "legitimate" business reason. "Individual decision-makers may intentionally dissemble in order to hide a reason that is non-discriminatory but unbecoming or small-minded, such as back-scratching, log-rolling, horse-trading, institutional politics, envy, nepotism, spite, or personal hostility." Id. at 1337.
[2] Fullmer, for his part, claims that the promise was never made in the first place. Rather, he claims that he told Ruffalo, "there were many factors that were considered, and it would be an overall evaluation of the person." Fullmer Aff., ¶ 4.
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242 Md. 290 (1966)
219 A.2d 58
STRICKLER ET AL.
v.
BOARD OF COUNTY COMMISSIONERS FOR PRINCE GEORGE'S COUNTY ET AL.
[No. 200, September Term, 1965.]
Court of Appeals of Maryland.
Decided April 26, 1966.
*292 The cause was argued before HAMMOND, HORNEY, MARBURY, BARNES and McWILLIAMS, JJ.
Hal C.B. Clagett, with whom were Sasscer, Clagett, Powers & Channing on the brief, for the appellants.
Lionell M. Lockhart, with whom were William L. Kahler and DeBlasis & Kahler on the brief, for the appellees.
BARNES, J., delivered the opinion of the Court.
Morris Miller, Inc., Gerald Miller, Inc. and Louis Miller, Inc. (Miller Associates), as contract purchasers, on March 25, 1963 petitioned the County Commissioners of Prince George's County, acting as the District Council for the Maryland-Washington Regional District of Prince George's County (District Council)[1] by Application A-4881 to rezone Lots 1 through 68 in Block N in a subdivision in the Sixth Election District of Prince George's County known as "Oxon Run Hills" from R-35 (semi-detached residences) to R-18 (medium density or "garden-type" apartments). These 68 lots contain 6.4607 acres and are laid out in a more or less "L" shape. The northerly part of the "L" is bounded on the east by 23rd Parkway, on the northwest by Catskill Street, on the southwest by Elko Place and on the south by Dunlap Street. The southerly and westerly part of the "L" is bounded on the north by Dixon Street, on the west by the lower or southerly portion of Catskill Street *293 (which curves to the northeast and then forms the northwesterly boundary of the northerly part of the "L" as we have noted) and on the south by Dunlap Street.
On August 21, 1963 the Technical Staff of the Maryland-National Capital Park and Planning Commission, Prince George's County Regional Office (Technical Staff) issued its report on Application A-4881 in which it recommended denial of the application, pointing out that the Master Plan for the Henson Creek Watershed proposed the R-35 zone for the property, that the character of the area to the east and west was that of single-family and two-family development, respectively, and that the development of apartments to the south in accordance with the master plan did not constitute a change of sufficient magnitude to justify a favorable consideration of the application.
On August 23, 1963, the Prince George's County Planning Board of the Maryland-National Capital Park and Planning Commission (Planning Board) unanimously recommended disapproval of Application No. A-4881.
In April 1963, the Miller Associates, as contract purchasers, petitioned the District Council, by Application A-4891, to rezone Lots 1 through 40 of Block P in the Oxon Run Hills from the R-35 zone to the R-18 zone. This property is a more or less triangular tract consisting of 3.9993 acres lying to the west and north of the "L" shaped parcel involved in Application A-4881 and is bounded on the northeast by Elko Place, on the south by Dixon Street and on the west by Catskill Street. The Technical Staff, on July 24, 1963, filed its report also recommending a denial of Application A-4891 and stated in some detail its reasons for recommending the denial with particular emphasis upon the provisions of the Henson Creek Master Plan, the surrounding uses, as well as other factors. The Planning Board also on July 24 unanimously disapproved Application A-4891.
It should be pointed out that to the south of Block N (Application A-4881), on the south side of Dunlap Street and east of Catskill Street is Holy Family Roman Catholic Church and Parochial School and to the east of the Church is an area zoned R-H for the Chestnut Hill Garden Apartments. On the west *294 side of Catskill Street across from Blocks N and P are the Green Valley Presbyterian Church, the Green Valley Elementary School and 6 vacant lots. The land lying to the northeast of Block N is developed for single-family or two-family use.
The Planning Board, notwithstanding its prior recommendations of disapproval of Applications A-4881 and A-4891, on October 2, 1963, by separate but similarly worded resolutions, unanimously rescinded its prior recommendations and recommended approval of the applications to the District Council, reciting in each new resolution: "The Board finds that there have been sufficient changes in the character of the area to justify the requested reclassification."
The District Council heard both Applications A-4881 and A-4891 together on October 16, 1963. The applicants produced the expert testimony of a civil engineer, an architect, a realtor and a land developer indicating that it was not economically feasible to erect the semi-detached houses permitted in the R-35 zone, but that it was feasible and desirable to erect the medium density or garden-type apartments permitted in the R-18 zone and that the erection of such apartments would not injure surrounding property. They also testified in regard to "change" in the neighborhood since the adoption of the last comprehensive zoning map. James M. Hennessey presented the Planning Board's resolutions of October 2, read the stated reason but gave no reason for the Planning Board's change of mind other than that stated in the resolutions. Several neighboring property owners and a representative of an interested civic association gave reasons why they thought the proposed rezoning would be injurious to the surrounding properties and would not be in the public interest.
On November 5, 1963, the District Council disapproved both applications and later sent copies of its resolutions of disapproval to the applicants. The applicants filed a petition for review before the Circuit Court for Prince George's County and after the District Council had filed its answer, the protesting neighbors and improvement association, who had appeared at the hearing before the District Council were added as parties defendant on February 13, 1964.
After a hearing before Judge Bowie in the Circuit Court, an *295 order was passed by Judge Bowie on March 5, 1964 remanding the case to the District Council "for the purpose of reexamination and consideration" and the District Council was directed as follows:
"[T]o get an additional report from the Technical Staff which is to reconsider these rezoning applications, A-4881 and A-4891, together, in light of the more recent approval by the Planning Board. When this additional Technical Staff report is submitted, considering the Lots in the two Blocks as a whole, then the District Council shall consider such recommendation from the Technical Staff with the other record of this case as previously heard, and with the admonition of this Court on the matters presented herein and take such action as they deem advisable under the circumstances, giving its reasons for such action." (Emphasis supplied).
The applications were again referred to the Technical Staff, which, on August 12, 1964 after considering Applications A-4881 and A-4891 together reaffirmed its original position in a carefully considered and full report. The conclusions of the Technical Staff were as follows:
"1. There is in existence a recently adopted Plan (The Master Plan for the Henson Creek Watershed, adopted May 15, 1963).
"2. The requested zoning (R-18 Zone) is not in conformance with the zoning proposed on the adopted Master Plan (R-35 Zone).
"3. We can find no evidence of sufficient change in the character of the area, based on either physical changes or on paper changes, to justify recommendations contrary to the adopted plan and we cannot presume a mistake in the adopted Plan.
"4. There is no evidence of an error in the original zoning map or in its adoption.
"5. The Plan, whose very purpose is to foresee needs, evidently does not foresee a public or community need that would support the requested change.
*296 "6. The need for space for multiple-family dwellings has been provided for at other locations on the adopted Plan."
The District Council, on January 19, 1965, after considering the opinion and order of the Circuit Court remanding the case, the additional report of the Technical Staff, the testimony produced at the original hearing of October 16, 1963, but taking no new testimony other than the Technical Staff's additional report of August 12, 1964, approved the rezoning of the properties in Applications A-4881 and A-4891 from R-35 to R-30 (rather than R-18) and stated:
"It was the determination of the District Council that the R-35 zoning which presently exists is not desirable, that the R-18 zoning requested would be entirely too dense zoning for this area, and that the property should be rezoned to the R-30 zone."
Judge Bowie affirmed this action of the District Council by an order passed on April 28, 1965, which, after reciting the action of the District Council, stated that it appeared to the court that "this action was not illegal, arbitrary or discriminatory." The appeal to this Court is from that order and was taken by the protesting neighboring property owners and the improvement association.
We are of the opinion that the rezoning order of the District Council of January 19, 1965 was arbitrary and capricious and Judge Bowie's order of April 28, 1965 affirming that action must be reversed.
The provisions of Section 79(i) of Chapter 780 of the Laws of 1959 (Chapter 780) clearly indicate that rezoning in Prince George's County must be supported by competent, material and substantial evidence in view of the entire record as submitted and must not be arbitrary or capricious, and if not so supported or if the District Council's action is arbitrary or capricious, the Circuit Court for Prince George's County may reverse that action. We have recently held that Chapter 780, as amended, controls rezoning in Prince George's County. Woodlawn Area Citizens Association v. Board of County Commissioners for Prince George's County, 241 Md. 187, 191, 216 *297 A.2d 149, 153 (1966). There is simply no evidence of any kind in the record before the District Council at either hearing in regard to the R-30 zone. All of the testimony and reports considered the R-35 and the R-18 zones, but there was no mention or consideration of the R-30 zone by the Technical Staff, the Planning Board or the oral testimony of any of the witnesses in regard to the nature or requirements of the R-30 zone. The resolution of the District Council does not give any reason for granting rezoning to the R-30 zone. It merely stated that the R-35 zoning was "not desirable", the R-18 zoning requested "would be entirely too dense" and that the property "should be rezoned to the R-30 zone." This last statement is the first time the R-30 zone was mentioned; it is obvious that no reason at all is given for that unrequested rezoning.
By Section 30.42 of the Prince George's County Zoning Ordinance[2] it is provided that the District Council "may grant a Zoning Map Amendment for a less intensive zone than that sought by the applicant for all or a part of the property for which zoning reclassification is requested," but this provision of the ordinance is subject to the statutory requirements that the unrequested, less intensive zone must be supported by competent evidence and its granting must not be arbitrary and capricious.
One cannot tell from the record before the District Council what the requirements of the R-30 zone are and what reasons prompted the District Council to grant the unrequested R-30 zone in regard to which, as we have indicated, there was no evidence whatsoever in the record before the District Council. In our opinion this attempted action by the District Council was entirely unsupported by competent, and indeed any, evidence and was arbitrary and capricious action by it.
As the District Council did not grant the R-18 zoning which it had rejected by its orders of November 5, 1963 with no new evidence before it which would have supported the granting of R-18 zoning, we do not reach the question of whether it would have been arbitrary and capricious to have granted R-18 zoning. Cf. Woodlawn Area Citizens Association, Inc. v. Board *298 of County Commissioners for Prince George's County, supra and Schultze v. Montgomery County Planning Board, 230 Md. 76, 185 A.2d 502 (1962). Nor do we reach the question of whether or not the District Council failed to comply with Judge Bowie's order of March 5, 1964 in that it gave no sufficient reasons for its action as required by that order of court.
We point out that the courts generally do not take judicial notice of ordinances of municipal corporations. Chief Judge Brune, for the Court, stated in Walker v. D'Alesandro, 212 Md. 163, 170-171, 129 A.2d 148, 152 (1957):
"In reaching the conclusion that the defendant was entitled to an absolute privilege in respect of the acts and statements complained of, the trial court took judicial notice of certain provisions of the Charter of Baltimore City and of an ordinance of the Mayor and City Council of Baltimore. The Code provides for the methods of proof of such an ordinance, not that the court shall take judicial notice thereof; and the general rule is that courts do not take judicial notice of such ordinances. Code (1951), Article 35, Section 75; Central Savings Bank v. Baltimore, 71 Md. 515, 18 A. 809, 20 A. 283; Givner v. Cohen, 208 Md. 23, 116 A.2d 357, and cases therein cited. The rule is not inflexible, as the Givner Case and Shanfelter v. Baltimore, 80 Md. 483, 31 A. 439, and McNally v. Moser, 210, Md. 127, 122 A.2d 555, show, where the ordinances have been considered below; and we shall comment upon the ordinance actually cited in the opinion of the trial court for much of the same reasons that ordinances not duly proven were considered in those cases."
Any ordinances relied on should be offered in evidence and made part of the record so that they will be before us on appeal. This Court will feel free to dismiss a case on appeal, sua sponte, if the relevant portions of the ordinances relied upon are not in the record on appeal. We trust that the Bar will not overlook this requirement, so that cases may be fully considered *299 on their merits rather than dismissed because of the incompleteness of the record on appeal.
Order of April 28, 1965, reversed, and the case remanded with instructions to the lower court to reverse the decision of the District Council of January 19, 1965, thus leaving in effect its orders of November 5, 1963, denying the applications; the costs to be paid by the Miller Associates.
NOTES
[1] The prevailing practice is to file the petition first with the Maryland-National Capital Park and Planning Commission.
[2] Set forth in the appellee's brief, but not appearing in the record on appeal.
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893 S.W.2d 416 (1995)
Paul SHELL, Betty Stimpson and Jeff Stimpson, Claimants-Appellants,
v.
STATE of Tennessee, Respondent-Appellee.
Supreme Court of Tennessee, at Jackson.
January 17, 1995.
Rehearing Denied February 21, 1995.
*417 Hal Gerber and Ronald D. Krelstein, Memphis, for Paul Shell.
Michael W. Whitaker, Covington, for Jeff Stimpson.
Langdon S. Unger, Jr., Martin, for Betty Stimpson.
Charles W. Burson, Atty. Gen. & Reporter, Michael E. Moore, Sol. Gen., Michael W. Catalano, Associate Sol. Gen., Nashville, for respondent-appellee.
OPINION
DROWOTA, Justice.
Paul Shell, Betty Stimpson and Jeff Stimpson appeal from the Court of Appeals' affirmance of the dismissal by the Tennessee Claims Commission of their action against the State of Tennessee for negligent deprivation of a constitutional right. The appellants' lawsuit is based on alleged prosecutorial misconduct in the investigation of reports of child sexual abuse in a day care center; this investigation ultimately led to the indictment and prosecution of the appellants for multiple sexual offenses. This appeal presents two issues for our review: (1) whether the appellants' action, which was filed in October 1989, was viable at that time in light of the legislature's repeal in May 1989 of the language in Tenn. Code Ann. § 9-8-307(a)(1)(N) authorizing suits against the State for the negligent deprivation of constitutional rights; and (2) assuming that a cause of action for the negligent deprivation of constitutional rights did exist at the time this action was filed, whether the statutory period of limitations on the action had expired when the appellants filed their action in October 1989.
FACTS AND PROCEDURAL HISTORY
During the early 1980's, these appellants were involved in various capacities with the Georgian Hills Early Childhood Center, a day care facility operated by the Georgian Hills Baptist Church. Paul Shell was the minister of the church; Betty Stimpson was the director of the day care center; and Jeff Stimpson, Betty's son, was employed by the day care center on a part-time basis. In early 1984, reports of child sexual abuse by certain Georgian Hills employees began to surface. The Shelby County District Attorney's office, under the guidance of Assistant District Attorney Phyllis Gardner, launched an extensive investigation concerning these reports. This investigation, which was carried out by a "task force" consisting of employees of the city, county, and state governments, led to the arrest of a Georgian Hills employee, Frances Ballard, in June 1984. Ballard was later indicted on multiple counts of aggravated rape and aggravated sexual battery involving 19 different children. See State v. Ballard, 855 S.W.2d 557, 559 (Tenn. 1993). The day care center ceased its operations in September 1984.
In December 1984, the Shelby County Grand Jury issued subpoenas to Shell and Betty Stimpson, directing them to turn over the names and addresses of all the children who had attended Georgian Hills for the relevant time period. Shell and Stimpson complied with the subpoenas. In their complaints, Shell and Betty Stimpson state that they were not warned by the district attorney that they were suspects in the investigation at that time.
After being apprised of the results of the district attorney's investigation, the grand jury charged Shell, Betty Stimpson, and Jeff Stimpson in May 1985 with several sexual *418 abuse offenses. The ensuing criminal prosecutions of Shell and the Stimpsons continued for a period of over three years. During this period, Betty and Jeff Stimpson were tried on various counts in their indictments; their trials, however, failed to produce any convictions. After Jeff Stimpson was acquitted on four counts of aggravated rape in October 1988, the district attorney dismissed all the remaining charges against the appellants on October 28, 1988.
On October 17, 1989, Betty and Jeff Stimpson filed a complaint with the division of claims administration pursuant to Tenn. Code Ann. § 9-8-307(a)(1)(D) and (N), alleging that Gardner had committed professional malpractice and had deprived them of their constitutional rights to due process of law because of her negligence in handling the investigation and prosecution of their cases. Specifically, the Stimpsons alleged that Gardner had committed prosecutorial misconduct by: (1) disseminating the names of alleged victims to private attorneys, thereby causing the Stimpsons and the day care center to be bombarded with civil lawsuits; (2) using improper interviewing techniques to pressure children into reporting that they had been molested; (3) withholding exculpatory evidence from the grand jury; and (4) ordering the members of the task force to destroy tapes of the initial interviews of the children so that the tapes would be unavailable for inspection by the defense counsel. Shell filed a substantially similar complaint on October 27, 1989. Because the division of claims administration was unable to act upon the complaints within ninety days, the claims were transferred to the Claims Commission for resolution pursuant to Tenn. Code Ann. § 9-8-402(c).
The Claims Commission dismissed the complaint,[1] holding that both causes of action had accrued prior to October 17, 1988, and were therefore barred by the one-year statute of limitations for personal injury actions. Tenn. Code Ann. § 28-3-104. The Court of Appeals affirmed the ruling of the commissioner. We granted the appellants' Rule 11 application for the limited purpose of deciding the two questions enunciated in the beginning of this opinion.[2]
I.
Before we address the statute of limitations question, we must first determine whether a cause of action existed for the negligent deprivation of a constitutional right on October 17, 1989 the date of the Stimpson complaint. Although this issue was not raised below, it is properly reviewable by this Court because its answer determines whether the Claims Commission had subject matter jurisdiction over these claims in the first instance. Tenn.R.App.P. 13(b).
In May 1984, the General Assembly enacted legislation which waived the State's sovereign immunity under certain conditions. Acts of 1984, ch. 972, 1984 Tenn. Pub. Acts 1026 (now codified at Tenn. Code Ann. § 9-8-307). In this act, the legislature created the Tennessee Claims Commission to hear certain claims against the State; one of the claims the commission was designated to entertain was for the "negligent deprivation of statutory or constitutional rights." Acts of 1984, ch. 972, § 8(a)(14), 1984 Tenn. Pub. Acts 1026, 1030. This section was eventually codified at Tenn. Code Ann. § 9-8-307(a)(1)(N). In May 1989, as part of an act modifying several provisions of § 9-8-307, the General Assembly deleted the words "or constitutional" from § 9-8-307(a)(1)(N). Acts of 1989, ch. 491, § 1, 1989 Tenn. Pub. Acts 853, 854.
The State argues that the 1989 amendment should be applied retroactively so as to bar the appellants' lawsuit. The State argues that the cause of action for the negligent deprivation of constitutional rights was created by the legislature in response to the United States Supreme Court's decision in Parratt v. Taylor, 451 U.S. 527, 101 S. Ct. 1908, 68 L. Ed. 2d 420 (1981), in which the Court held that the negligent deprivation of an individual's constitutional rights could, in an appropriate case, give rise to a claim under 42 U.S.C. § 1983. The State asserts that, *419 because the legislature was attempting to encourage plaintiffs to file claims in the Claims Commission in lieu of bringing § 1983 actions against state employees, it created the cause of action.
However, in Daniels v. Williams, 474 U.S. 327, 106 S. Ct. 662, 88 L. Ed. 2d 662 (1986) the Supreme Court overruled Parratt and held that mere negligence of the part of state officials does not implicate the due process clause, and therefore does not state a cause of action under § 1983. The State asserts that because of Daniels, the legislature deleted the words "or constitutional" from § 9-8-307(a)(1)(N) in May 1989.
The legislative history of the 1989 amendment supports the State's explanation. One of the sponsors of the bill, Senator Riley Darnell, explained in the Senate floor debates that:
T.C.A. 9-8-307(a)(1)(N) gives the Claims Commission jurisdiction over claims based on negligent deprivation of statutory or constitutional rights. This was done in part to encourage people to use the Claims Commission to file their lawsuits rather than going to federal court. Since we had done that, the United States Supreme Court has indicated that actions brought under 42 U.S.C. 1983 cannot be based on negligent conduct. Therefore, we're deleting the word "constitutional" from the bill so that negligent conduct is not one of those that would be brought in lieu of a 1983 civil rights action.
The State concludes that because § 9-8-307(a)(1)(N) was intended to mirror the requirements of a § 1983 action, and because the Supreme Court held that negligence cannot be the basis of a § 1983 action, the 1989 amendment should be retroactively applied to January 21, 1986 the date the Daniels decision was handed down.
This argument must fail for a number of reasons. First, a basic rule of statutory construction provides that statutes are to be applied prospectively, unless the legislature clearly indicates to the contrary. Woods v. TRW, Inc., 557 S.W.2d 274, 275 (Tenn. 1977); United Inter-Mountain Tel. Co. v. Moyers, 221 Tenn. 246, 426 S.W.2d 177, 181 (1968); Menefee Crushed Stone Co. v. Taylor, 760 S.W.2d 223, 226 (Tenn. App. 1988). Section 7 of ch. 491 states that "[t]his act shall take effect upon becoming a law, the public welfare requiring it." The act was passed by both houses on May 24, 1989; it was signed by Governor McWherter on June 1, 1989. It therefore became effective on that date, and there is nothing in the text of the act or in its legislative history to indicate that the legislature intended that it should be applied retroactively.
Moreover, although the legislative history does illustrate that one of the General Assembly's purposes in enacting § 9-8-307(a)(1)(N) was to provide plaintiffs with an alternative to § 1983, the statute did not by its express terms limit the action to the deprivation of federal constitutional rights, which is the exclusive concern of a § 1983 action. There is no indication in the legislative history of the bill that the provision was not intended to apply equally to the negligent deprivation of state constitutional rights. Therefore, the fact that § 9-8-307(a)(1)(N) was sensitive to changes in § 1983 jurisprudence does not mean that it ceased to have any legal effect after the Daniels decision was rendered.
The State alternatively asserts that the 1989 amendment is a remedial statute because it simply divested the Claims Commission of jurisdiction over this cause of action and placed it within the jurisdiction of the Board of Claims. The State contends that because remedial statutes may be applied to causes of actions that have accrued before the passage of the legislation, the appellants were barred from bringing their action in the Claims Commission.
It is true that statutes affecting only the method or the procedure for prosecuting or defending a cause of action may be applied retroactively. Saylors v. Riggsbee, 544 S.W.2d 609, 610 (Tenn. 1976); Burton v. Borden Foods Co., 494 S.W.2d 775, 777 (Tenn. 1972); Morford v. Yong Kyun Cho, 732 S.W.2d 617, 620 (Tenn. App. 1987). A remedial or procedural statute is one that does not affect the vested rights or liabilities of the parties. Examples of remedial legislation are statutes concerning the venue of an *420 action, Burton, Morford; or statutes dealing with service of process, Saylors. Statutes that create a new right of recovery or change the amount of damages recoverable are, however, deemed to have altered the parties' vested rights and thus are not considered remedial. Anderson v. Memphis Housing Authority, 534 S.W.2d 125, 127-28 (Tenn. App. 1975); School Commissioners v. State, 26 Tenn. 113 (1846).
The effect of the 1989 amendment cannot be fairly characterized as "remedial." Although the Board of Claims does have residual jurisdiction over claims falling outside the jurisdiction of the Claims Commission, Tenn. Code Ann. § 9-8-108(a)(1), the Board of Claims is not required to hear any claim that is presented to it; its authority to hear claims is purely discretionary. § 9-8-108(a)(1). There is no statutory authority to appeal from the Board's decision not to hear a claim. Moreover, a decision on the merits of the claim rendered by the Board of Claims is not appealable, § 9-8-108(a)(1), whereas a final decision rendered by the Claims Commission is appealable to the Court of Appeals. Tenn. Code Ann. § 9-8-403(a)(1). Therefore, it is clear that once the Claims Commission is divested of jurisdiction over a particular claim, the plaintiff no longer possesses an unqualified right to have a state administrative tribunal determine the merits of the claim.
This is crucial because of the constitutional and statutory limitations on a plaintiff's ability to bring an action against the State. The State of Tennessee is immune from suit for money damages in federal court by virtue of the Eleventh Amendment to the United States Constitution. Chadhuri v. Tennessee, 767 F. Supp. 860, 862-63 (M.D.Tenn. 1991). Moreover, the State is immune from suit in a state court unless the legislature specifically provides to the contrary. Tenn. Const. Art. I, § 17; Tenn. Code Ann. § 20-13-102; Brewington v. Brewington, 215 Tenn. 475, 387 S.W.2d 777, 779 (1965); Greenhill v. Carpenter, 718 S.W.2d 268, 270 (Tenn. App. 1986). Because of these restrictions, and the statutory provisions concerning the Board of Claims, the legislature's removal of this cause of action from the jurisdiction of the Claims Commission is functionally equivalent to a complete repeal of the cause of action. Therefore, the 1989 amendment cannot be considered remedial or procedural. And it cannot serve to bar the appellants' cause of action, which had accrued before June 1, 1989 the effective date of the amendment.
II.
Having decided that a cause of action for the negligent deprivation of a constitutional right did exist in the Claims Commission as of October 17, 1989, we must now decide when the cause of action accrued for statute of limitations purposes. The appellants argue that we should adopt a rule similar to that used in malicious prosecution actions and hold that the action does not accrue until the plaintiff is vindicated by the judicial process[3] in this case, on October 28, 1988, the date the indictments were dismissed. The appellants argue that requiring a criminal defendant to bring the action before vindication is illogical and wasteful of judicial resources because if the defendant is convicted, he could claim no damages for any prosecutorial misconduct. The appellants also point out that in order to avoid "inconsistent judgments" (presumably a judgment for the plaintiff in the civil action and a judgment of conviction in the criminal prosecution), the trial court in the civil action would invariably stay the proceedings pending the outcome of the criminal prosecution. Therefore, the appellants argue, a rule requiring the plaintiff to file before the criminal proceedings terminate in his favor is a practical nullity that will needlessly burden scarce judicial resources.
The State replies that this action, although based on the deprivation of constitutional rights, is nevertheless a negligence action and should be analyzed accordingly. It argues that established principles of negligence *421 law require the action to be brought within a year of the defendant's breach of a legal duty owed to the plaintiff. It concludes that this cause of action accrued when the indictment was handed down because the prosecutor allegedly breached the appellants' due process rights during the pre-indictment investigation of the case.
We find the State's contentions generally persuasive.[4] Although the appellants' policy arguments are somewhat attractive from a practical standpoint, they are ultimately based on a faulty premise: that this action can or should be analogized to malicious prosecution actions. The legislature definitely did not intend to subject the State to such claims: the Claims Commission does not have jurisdiction over malicious prosecution claims; in fact, it does not have jurisdiction over any intentional torts. Tenn. Code Ann. § 9-8-307(a). Moreover, although state officers and employees are liable in their individual capacities for malicious acts, Tenn. Code Ann. § 9-8-307(h), it is settled that prosecutors are immune from actions for malicious prosecution under both § 1983, Imbler v. Pachtman, 424 U.S. 409, 96 S. Ct. 984, 47 L. Ed. 2d 128 (1976), and state common law, Willett v. Ford, 603 S.W.2d 143 (Tenn. App. 1979). Because of the unequivocal legislative and judicial pronouncements regarding the availability of an action for malicious prosecution against prosecutors, it would be improper to selectively incorporate certain elements of that cause of action into this negligence action.[5] We therefore hold that the issue of when this cause of action accrued is to be determined by reference to generally applicable principles of negligence law.
This determination effectively decides the question, for although we have never directly addressed the issue of when an action for the negligent deprivation of a constitutional right accrues, the basic principles governing that issue are clear. For example, in Windsor v. A Federal Executive Agency, 614 F. Supp. 1255 (M.D.Tenn. 1983), aff'd without opinion, 767 F.2d 923 (6th Cir.1985), the plaintiff brought an action against the United States Department of Justice and its agents for, inter alia, the deprivation of his Fifth Amendment Due Process rights. The plaintiff's specific allegation was that the named agents had wrongfully disseminated false information to the Tennessee Board of Professional Responsibility, thereby causing disciplinary proceedings to be brought against him.
The District Court for the Middle District of Tennessee held that the plaintiff's constitutional claims were barred by Tennessee's one-year statute of limitations for personal injury actions. The Court reasoned as follows:
The plaintiff alleges that the defendants committed their wrongful acts in November 1981; however, this action was not commenced until June 28, 1983, well more than 1 year after the defendants are alleged to have disseminated wrongfully the Thoresen-affidavit. In an obvious effort to avoid the bar of the statute of limitations, Mr. Windsor alleges (in his complaint) that
* * * [t]he oppressive result of Defendants' conduct remained in effect upon the plaintiff until November of 1982, when the alleged charge was dismissed *422 by the Board. Plaintiff brought this action within one year therefrom * * *
He, thus, appears to contend his action was timely because (1) his cause of action accrued not in November, 1981, when the defendants acted but in November 1982, when the effect of their conduct ceased to have an effect upon the plaintiff; or (2) the running of the statute of limitations was tolled, or suspended, during the period that the conduct of the defendants remained in effect upon him.
The Court finds no support whatever for the proposition that Mr. Windsor's cause of action did not accrue until November, 1982, a year after the defendants are alleged to have disseminated wrongfully the false information. The plaintiff cited no authority supporting such a notion, and the Court's independent research disclosed none.
Under the law of Tennessee, a cause of action accrues when the plaintiff suffers in actuality a legally-cognizable wrong and thus acquires a right to bring suit for redress. Hodge v. Service Machine Co., 438 F.2d 347, 349 (6th Cir.1971); Vason v. Nickey, 438 F.2d 242, 246 (6th Cir.1971); Armistead v. Clarksville-Montgomery County Sch. Sys., 222 Tenn. 486, 437 S.W.2d 527, 528-29 (1969). Where, as here, it is alleged that the defendants disseminated wrongfully untruthful information about the plaintiff, the cause of action accrues, and the statute of limitations begins to run, at the time such dissemination takes place. Riley v. Dun & Bradstreet, 172 F.2d 303, 308 (6th Cir.1949); Heller v. Smither, 437 F. Supp. 1, 4-5 (D.C.Tenn. 1977), aff'd, 578 F.2d 1380 (6th Cir.1978); Applewhite v. Memphis State University, 495 S.W.2d 190, 195 (Tenn. 1973).
The Supreme Court has held (in an action brought under 42 U.S.C. § 1983, supra), that the applicable state statute of limitations begins to run at the time of the alleged wrongful conduct, not at the point when the consequences of the conduct became painful. Chardon v. Fernandez, 454 U.S. 6, 7, 102 S. Ct. 28, 29, 70 L. Ed. 2d 6 (1981). That being so, it can hardly be said that the statute of limitations does not begin to run until the result of the wrongful conduct ceases to have an effect on the plaintiff.
614 F. Supp. at 1262-63.
With the applicable principles in mind, the first step in our analysis is to determine what conduct, if any, of the defendant in this case could have given rise to a legally cognizable injury. The United States Supreme Court, in Burns v. Reed, 500 U.S. 478, 111 S. Ct. 1934, 114 L. Ed. 2d 547 (1991), and Buckley v. Fitzsimmons, 509 U.S. ___, 113 S. Ct. 2606, 125 L. Ed. 2d 209 (1993) has provided the answer: a prosecutor is potentially liable (in other words, possesses only qualified, rather than absolute, immunity) for actions taken in an investigative or administrative capacity, but not in his capacity as an advocate for the State.[6] Applying the Burns/Buckley rule to this situation, the appellants have stated several legally cognizable injuries. Among these include the prosecutor's dissemination of the names of the alleged victims to private attorneys, the improper interviewing techniques during the initial investigation, and the destruction of the tapes of the initial investigation.
It is, however, abundantly clear that all of these injuries occurred well before October 17, 1988 one year before the Stimpson's complaint was filed. Moreover, the appellants do not argue that they were unaware of these illegal actions. Indeed, there is ample evidence in the record that the appellants knew of the prosecutor's wrongdoing. In November 1985, the appellants filed a motion to exclude the prosecutor from participation in the case because of her mishandling of the investigation. Moreover, the affidavit of two attorneys representing the appellants states that they learned in late 1986, during the *423 course of discovery in the related civil cases, that the prosecutor had instructed members of the task force to record over the tapes of the initial interviews. This statement is supported by the fact that the appellants filed motions in the trial court in late 1986 and early 1987 requesting the court to order the State to turn over all exculpatory evidence. Thus, there is no question that the appellants knew of the injuries well before October 17, 1988.
Although we hold that this lawsuit is barred by the statute of limitations, we do not hold that any possible cause of action for prosecutorial misconduct such as a § 1983 action invariably accrues upon the return of an indictment. While it is more likely that a prosecutor will be acting as an advocate rather than an investigator after the defendant is formally indicted, it is theoretically possible that the prosecutor could still perform acts of an investigative nature after the indictment. See Buckley v. Fitzsimmons, 509 U.S. ___, ___ n. 5, 113 S. Ct. 2606, 2616 n. 5, 125 L. Ed. 2d 209 (1993). In such a case, the plaintiff would not have suffered a legally cognizable injury until after the indictment was returned. Therefore, we hold that the accrual of the cause of action depends on when the plaintiff has suffered a legally cognizable injury.[7]
The judgment of the Court of Appeals is affirmed.
ANDERSON, C.J., BIRCH, J., and O'BRIEN, Special Justice, concur.
REID, J., dissents. See separate opinion.
REID, Justice, dissenting.
I dissent because, in my opinion, the Court's decision denies those persons oppressed by the negligent conduct of public officials an effective means of vindicating the violation of their civil rights; and, also, because the opinion permits a defendant in a criminal case to compromise the prosecution of that case by commencing a civil action for damages against the prosecuting attorney and others prior to the conclusion of the criminal proceedings.
I agree with the holding by the Court that, pursuant to T.C.A. § 9-8-307(a)(1)(N), a cause of action for the negligent deprivation of a constitutional right, triable in the claims commission, did exist in Tennessee prior to the date on which that statute was amended.[1]
I do not agree that the causes of action in this case accrued prior to October 28, 1988, the date on which the State dismissed the criminal actions against the claimants, and were, as held by the majority, barred by the statute of limitations when the claims were filed.
*424 I
Claimant Paul Shell was the minister of the Georgian Hills Baptist Church in Memphis, claimant Betty Stimpson was the director of the day care center operated by the church, and claimant Jeff Stimpson was employed by the day care center on a part-time basis. In early 1984, claims were made that children at the center were being sexually abused. The Shelby County District Attorney General's office, under the direction of Phyllis Gardner, an assistant district attorney, began an investigation of the charges. Gardner headed a "task force" which included personnel from various government agencies.
Based on the results of the investigation, the grand jury, in May 1985, returned indictments charging Shell, Betty Stimpson, and Jeff Stimpson on several counts of sexual abuse. However, despite several trials, none of the claimants were convicted. More than three years later, on October 28, 1988, after Jeff Stimpson had been acquitted on four counts of aggravated rape, the district attorney general dismissed all remaining charges.
On October 17, 1989, Betty and Jeff Stimpson filed claims with the division of claims administration, pursuant to T.C.A. § 9-8-307(a)(1)(D) and (N). The claimants alleged that the assistant district attorney general had deprived them of their constitutional rights to due process of law because of her negligence in handling the investigation and prosecution of the cases. The claimants do not contest the State's claim that as to her prosecutorial functions Gardner had immunity. They insist, however, that she continued to act in an investigative and advisory capacity until the charges had been dismissed. Specifically, the Stimpsons alleged that Gardner disseminated the names of alleged victims to private attorneys, thereby causing the Stimpsons and the day care center to be bombarded with civil lawsuits; used improper interviewing techniques which pressured children into reporting to the investigators and the grand jury that they had been sexually abused; negligently failed to provide exculpatory evidence to the grand jury; negligently destroyed tapes of interviews with the children, which would have been useful by the defense at trial; negligently reported false information to other members of the district attorney general's office, the trial judge, and the public at large; and thereby violated their rights under the Fifth Amendment to the United States Constitution, and Article I, Section 8 of the Tennessee Constitution. The complaint alleges that the acts were committed during the period of time commencing in June of 1984 and ending on October 28, 1988. It further alleges that the acts were committed by the assistant district attorney general in a "negligent and grossly negligent manner."
Shell filed his complaint which was based on the same grounds, on October 27, 1989. The claims were transferred to the Claims Commission pursuant to T.C.A. § 9-8-402(c). The Claims Commission dismissed the claims, holding that the actions accrued prior to October 17, 1988, and were barred by the one-year statute of limitations. T.C.A. § 28-3-104.
II
Since the case is before the Court on the State's plea of the statute of limitations, the date on which the causes of action accrued is the critical fact. The nature of the cause of action asserted in the complaint and the elements thereof, determine when the causes of action accrued, and, therefore, the date on which the time for initiating the actions expired.
The claimants contend that favorable termination of criminal proceedings is essential to their causes of action, therefore, their claims did not accrue until they had been vindicated by the dismissal of the indictments on October 28, 1988.[2]
*425 The majority finds that "the issue of when this cause of action accrued is to be determined by reference to generally applicable principles of negligence law," (Majority Opinion, p. 420) and apparently holds that the causes of action accrued on the date the wrongful actions occurred. (Majority Opinion, p. 422).[3]
For present purposes, the important point in the majority opinion is that the dismissal of the criminal proceedings has no bearing on when the causes of action accrued. The majority treats the dismissal of the indictments as though it were an unrelated event, like the claimants being involved in an automobile accident with the prosecutor.
III
Since the claims allowed against the State under Section 9-8-307 include various causes of action in contract and in tort, there is no single limitation of action applicable to all claims made pursuant to that statute. However, the disputed issue in this case is not the applicable statute of limitations, but the date on which the causes of action accrued. Claims pursuant to T.C.A. § 9-8-307(a)(1)(N) must be brought within one year. T.C.A. § 28-3-104; Wilson v. Garcia, 471 U.S. 261, 276, 105 S. Ct. 1938, 1947, 85 L. Ed. 2d 254 (1985). The applicable period of limitations commences to run only when the particular cause of action asserted has accrued. In each case, it is necessary that the precise nature of the cause of action alleged be examined in order to determine when the cause of action accrued, and, therefore, when the statutory time within which suit may be filed commenced. This Court has not considered the elements of a cause of action for the negligent deprivation of a constitutional right, nor has it determined when the cause of action accrues. In Swauger v. Haury & Smith Contractors, Inc., 512 S.W.2d 261, 262 (Tenn. 1974), this Court stated,
the applicable statute of limitations in a particular cause will be determined according to the gravamen of the complaint.
The gravamen of the complaint, therefore, determines when the action accrues and when the applicable statute starts to run.
The gravamen of the complaint is stated explicitly in the statute, the negligent deprivation of constitutional rights. Since negligence is the breach of a legal duty of care, the breach by a state official or employee of a duty of care imposed upon such person by the state or federal constitution constitutes a cause of action under Section 9-8-307(a)(1)(N). Tennessee courts have recognized such duty, its breach, and the resulting cause of action in only two cases. In Bryson v. State, 793 S.W.2d 252, 255 (Tenn. 1990), this Court stated:
The State insists that the claim does not sound either in negligence or in contract. T.C.A. § 9-8-307(a)(1)(N) (Supp. 1988) gives the Commission the authority to hear claims arising from the negligent deprivation of statutory or constitutional rights. The Tennessee Department of Corrections is required by statute to furnish medical care to prisoners in its custody. As an inmate in a state correctional institution, Mr. Bryson had the statutory right to receive medical treatment at the State's expense. It follows that the Tennessee Claims Commission, under T.C.A. § 9-8-307(a)(1)(N), has jurisdiction to decide a claim brought by Mr. Bryson for deprivation for that statutory right.
In Computer Shoppe, Inc. v. State, 780 S.W.2d 729 (Tenn. App. 1989), the Court of Appeals recognized the possibility of a cause of action under Section 9-8-307(a)(1)(N), based on the State's negligence in issuing an *426 invitation to bid for certain computer equipment. However, neither of these cases is helpful in determining the issue before this Court, when the cause of action accrues.
Since the causes of action which may be brought under Section 9-8-307(a)(1)(N) are those for which immunity was waived by the legislature to provide a substitute for actions in negligence in federal courts pursuant to Section 1983, review of comparable cases under Section 1983 is instructive in determining when the causes of action accrued and the applicable period of one year began to run.
The United States Supreme Court had no occasion to discuss the determination of the applicable limitation of actions in either Parratt v. Taylor, 451 U.S. 527, 101 S. Ct. 1908, 68 L. Ed. 2d 420 (1981) or Daniels v. Williams, 474 U.S. 327, 106 S. Ct. 662, 88 L. Ed. 2d 662 (1986). However, in Albright v. Oliver, ___ U.S. ___, 114 S. Ct. 807, 127 L. Ed. 2d 114 (1994), in one of three concurring opinions, the issue was discussed. In that case, Albright was arrested on a charge which the trial court later found did not state an offense under state law. According to the facts as alleged in the complaint, it was clear that the defendant police officer knew or should have known that he did not have probable cause to arrest Albright. Albright filed a suit under Section 1983, alleging that the police officer deprived him of his right to substantive due process under the Fourteenth Amendment to be free from criminal prosecution except upon probable cause. The dismissal of the suit was affirmed by the Supreme Court upon a finding that Albright's claimed right to be free from prosecution without probable cause must be judged under the Fourth Amendment rather than the substantive due process provision of the Fourteenth Amendment. However, Justice Ginsburg, analyzing the allegations under the Fourth Amendment, which was not pleaded by the plaintiff, stated:
Once it is recognized, however, that Albright remained effectively "seized" for trial so long as the prosecution against him remained pending, and that Oliver's testimony at the preliminary hearing, if deliberately misleading, violated the Fourth Amendment by perpetuating the seizure, then the limitations period should have a different trigger. The time to file the § 1983 action should begin to run not at the start, but at the end of the episode in suit, i.e., upon dismissal of the criminal charges against Albright. See McCune v. Grand Rapids, 842 F.2d 903, 908 (CA6 1988) (Guy, J., concurring in result) ("Where ... innocence is what makes the state action wrongful, it makes little sense to require a federal suit to be filed until innocence or its equivalent is established by the termination of the state procedures in a manner favorable to the state criminal defendant."). In sum, Albright's Fourth Amendment claim, asserted within the requisite period after dismissal of the criminal action, in my judgment was neither substantively deficient nor inevitably time-barred.
Id. ___ U.S. at ___, 114 S.Ct. at 816 (Ginsburg, J. concurring).
Justice Ginsberg's reasoning is applicable to the case before the Court. The prosecution was dismissed prior to conviction. The basis for the State's wrongful prosecution of the claimants was the negligent acts of the state officer. The claimants' innocence is what made the state action, the criminal prosecution based on Gardner's negligence, wrongful. That innocence, or its equivalent, was not established until the criminal prosecution was terminated, and was, as noted by Justice Ginsberg in Albright, most relevant to the civil action asserted by the claimants.
In Dunn v. State of Tennessee, 697 F.2d 121 (6th Cir.1982), cert. denied, 460 U.S. 1086, 103 S. Ct. 1778, 76 L. Ed. 2d 349 (1983), a civil action for damages based on the constitutional right against unreasonable searches was found to be analogous in principle to a civil action for malicious prosecution. In that case, which was an action under Section 1983 against two police officers, the plaintiff alleged that he had been deprived of his constitutional rights by being arrested and prosecuted for attempting to exercise the right to be free from unreasonable searches. The court stated the issue:
The narrow issue raised here is whether plaintiff's 1983 action "accrued" under this statute upon the date when Dunn successfully *427 defended the criminal charges against him in the Tennessee Court.
Id. at 126 (citations omitted). And the court stated its finding:
this Court finds that favorable termination of the prior criminal proceeding marks the point at which a 1983 claim for malicious prosecution accrues.
Id. at 126-27 (citing to other jurisdictions finding that constitutional claims brought under Section 1983 which are essentially criminal prosecution claims, require that the criminal proceedings be terminated before the civil action is brought).
In Morrison v. Jones, 551 F.2d 939 (4th Cir.1977), an action was brought against a county and several of its police officers to recover damages for the deprivation of constitutional rights on the allegation that the police officers had maliciously conspired to prosecute the plaintiff. The district court dismissed the suit upon finding that, though brought within one year from the date the charges had been dismissed, it was barred because the cause of action had accrued on the date the plaintiff had been arrested. The circuit court reversed, holding that
Since federal law does not define the elements of the claim, we adopt the common law rule that favorable termination of the proceedings is essential. Consequently, the claim does not accrue until the proceedings are terminated.
Id. at 940-41 (citations omitted).
Allowing a defendant in a criminal prosecution to file a Section 1983 action for damages prior to the favorable conclusion of the criminal proceeding, may result in "`the creation of two conflicting resolutions arising out of the same or identical transactions.'" Heck v. Humphrey, ___ U.S. ___, ___, 114 S. Ct. 2364, 2371, 129 L. Ed. 2d 383 (1994) (quoting 8 S. Speiser, C. Krause, & A. Gans, American Law of Torts § 28:5, p. 24 (1991)). In that case, in which the criminal prosecution had proceeded to conviction, the United States Supreme Court held there can be no cause of action for damages based on an alleged unconstitutional conviction until the conviction has been invalidated. In Heck v. Humphrey, the plaintiff claimed that the defendants, acting under color of state law, had engaged in unlawful acts that had led to his arrest and conviction, which conviction was affirmed by the state supreme court. The United States Supreme Court affirmed the dismissal of a Section 1983 complaint for damages. The Court held that,
in order to recover damages for allegedly unconstitutional conviction or imprisonment, or for other harm caused by actions whose unlawfulness would render a conviction or sentence invalid, a § 1983 plaintiff must prove that the conviction or sentence has been reversed on direct appeal, expunged by executive order, declared invalid by a state tribunal authorized to make such determination, or called into question by a federal court's issuance of a writ of habeas corpus, 28 U.S.C. § 2254. A claim for damages bearing that relationship to a conviction or sentence that has not been so invalidated is not cognizable under § 1983. Thus, when a state prisoner seeks damages in a § 1983 suit, the district court must consider whether a judgment in favor of the plaintiff would necessarily imply the invalidity of his conviction or sentence; if it would, the complaint must be dismissed unless the plaintiff can demonstrate that the conviction or sentence has already been invalidated. But if the district court determines that the plaintiff's action, even if successful, will not demonstrate the invalidity of any outstanding criminal judgment against the plaintiff, the action should be allowed to proceed, in the absence of some other bar to the suit. (Footnotes omitted).
The Court noted that "[j]ust as a cause of action for malicious prosecution does not accrue until the criminal proceedings have terminated in the plaintiff's favor, ... so also a § 1983 cause of action for damages attributable to an unconstitutional conviction or sentence does not accrue until the conviction or sentence has been invalidated." Id. ___ U.S. at ___, 114 S.Ct. at 2374. See also McCune v. Grand Rapids, 842 F.2d 903, 908 (6th Cir.1988) (Guy, J., concurring in result) ("[i]f vindication is necessary to your claim, you have no claim until you are vindicated").
Recently, a judgment of the Second Circuit Court of Appeals was vacated by the United *428 States Supreme Court because, contrary to Heck v. Humphrey, it held that a plaintiff's cause of action for a civil rights violation accrued on the date of his arrest rather than the date his conviction was vacated. Woods v. Candela, 13 F.3d 574 (2nd Cir.1994), vacated, ___ U.S. ___, 115 S. Ct. 44, 130 L. Ed. 2d 5 (1994). Under Heck, the plaintiff in a Section 1983 action for damages must show the criminal conviction has been invalidated if a judgment in the plaintiff's favor would necessarily imply that the conviction was invalid. That holding, on principle, is precisely applicable to the case before the Court.
On the motion to dismiss, the Court in this case must assume that the proof would support the allegations that the state officer withheld and destroyed exculpatory evidence and that her negligent conduct "proximately caused claimant to suffer a deprivation of rights and to be subjected to abuse of process by false and recklessly prepared indictments and prosecutions." That proof necessarily would imply the invalidity of any conviction or sentence which might have been imposed upon the claimants in the criminal proceedings creating the result condemned by Heck two conflicting judicial resolutions arising out of the same transaction. That the criminal prosecution of the claimants terminated by dismissal of the indictments rather than by post-conviction invalidation of convictions is of no consequence. Cf. Albright v. Oliver, ___ U.S. at ___, 114 S.Ct. at 810. The significant principle is that the civil action does not accrue unless and until the criminal proceeding has been terminated favorably to the criminal defendant, civil plaintiff.
The cause of action alleged in the case before the Court is similar to those actions brought under Section 1983 in which the federal courts have found the cause of action does not accrue until the claimant has been absolved of any criminal liability. I find these cases persuasive, especially Justice Ginsberg's analysis in Albright v. Oliver, supra at ___, 114 S.Ct. at 812, and the rationale and holding of Heck v. Humphrey, supra ___ U.S. at ___-___, 114 S.Ct. at 2371-72.
The first significant effect of the Court's decision in this case is that it allows, actually compels, the defendant in a criminal case to commence and prosecute a civil action for damages while defending the criminal prosecution. These simultaneous criminal and civil proceedings will present conflicting and disruptive issues and even inconsistent results.
Another effect of the Court's decision is that requiring a criminal defendant to file a claim for damages before the conviction has been invalidated, as a practical matter, will defeat the civil cause of action. Since most criminal prosecutions are not completed within one year, the time within which a civil action for damages must be filed, a person being prosecuted would have the Hobson's choice of energizing the prosecution by filing a suit for damages against the state official or employee acting under color of state law, or allowing the time to pass without filing suit and thereby lose the cause of action for damages. Few will assert the right to damages at the risk of their freedom. Consequently, the remedy for the negligent deprivation of constitutional and statutory rights is, under the majority decision, illusory. The statute was designed to protect the rights of those who are oppressed by official neglect of duty. Justice Souter noted the history of Section 1983, for which T.C.A. § 9-8-307(a)(1)(N) was enacted as an alternative proceeding, as the Ku Klux Act,
enacted in part out of concern that many state courts were "in league with those who were bent upon abrogation of federally protected rights."
Heck v. Humphrey, ___ U.S. at ___, 114 S.Ct. at 2380 (Souter, J., concurring). The Court's decision in this case will impede rather than facilitate the protection of those rights.
IV
In summary, I dissent because the majority opinion will allow the integrity of a criminal proceeding to be compromised by a simultaneous civil action and because, effectively, it will deny any remedy for the deprivation of the rights that the statute was enacted to protect.
*429 I would hold that the cause of action in this case accrued upon dismissal of the charges and remand the case to the trial court.
NOTES
[1] Because the parties' claims were so similar, the Claims Commission consolidated the complaints.
[2] We express no opinion as to the validity of the appellants' cause of action based on professional negligence.
[3] One of the elements of a malicious prosecution action is that the underlying action has terminated in favor of the plaintiff. See, e.g., Donaldson v. Donaldson, 557 S.W.2d 60, 62 (Tenn. 1977); Kauffman v. A.H. Robins Co., 223 Tenn. 515, 448 S.W.2d 400, 402 (1969); Dunn v. Tennessee, 697 F.2d 121, 125 n. 4 (6th Cir.1982).
[4] We are not persuaded that any action for prosecutorial misconduct, such as a § 1983 action, inevitably accrues when the indictment is handed down. See p. 423, infra.
[5] The dissent engages in this selective incorporation by first citing several federal cases which analogize a § 1983 action to a state malicious prosecution action, and then concluding that: "[t]he cause of action alleged in the case before the Court is similar to those actions brought under Section 1983 in which the federal courts have found the cause of action does not accrue until the claimant has been absolved of any criminal liability." Dissent, at 428 (emphasis added). The dissent's analysis, however, ignores the fact that the action before us is not based on § 1983. Moreover, the section relied upon by the appellants, § 9-8-307(a)(1)(N), explicitly provides an action against the State for negligence; it makes no mention whatsoever of malicious prosecution. Finally, as discussed above, it is well-settled that a plaintiff may not bring a malicious prosecution against either the State or against a prosecutor individually. Therefore, the dissent's reliance upon the malicious prosecution analogy, however well-grounded in policy, is simply unwarranted in light of the statutory and judicial pronouncements militating against such an analogy.
[6] Burns and Buckley are § 1983 actions. They are relevant to this action because § 1983 incorporates the common-law immunities historically granted to governmental officers; and Tenn. Code Ann. § 9-8-307(g) provides that "no language contained in this chapter is intended to be construed to abridge the common-law immunities of state officials and employees." See also Willett v. Ford, 603 S.W.2d 143 (Tenn. App. 1979) (immunities recognized in § 1983 applicable to common law actions against prosecutors).
[7] While the cause of action for negligent deprivation of constitutional rights no longer exists, this holding is nevertheless important because the statutory period of limitations for § 1983 actions is controlled by state law. Tenn. Code Ann. § 28-3-104; Harrison v. Wright, 457 F.2d 793 (6th Cir.1972).
[1] T.C.A. § 9-8-307(a)(1)(N) (1992), as amended in 1989 (Acts of 1989, Chapter 491, Section 1) still permits claims against the State for "negligent deprivation of statutory rights." Consequently, the Court's opinion in this case is not limited to constitutional claims under that statute which arose prior to the 1989 amendment. Further, I would express no opinion as to the validity of the rationale which the state contends prompted the repeal of that portion of T.C.A. § 9-8-307(a)(1)(N) which referred to constitutional rights. Relief was denied in Parratt v. Taylor, 451 U.S. 527, 101 S. Ct. 1908, 68 L. Ed. 2d 420 (1981), because "the state of Nebraska has provided respondent with the means by which he can receive redress for the deprivation. The State provides a remedy to persons who believe they have suffered a tortious loss at the hands of the State." Parratt, 451 U.S. 527, 101 S.Ct. at 1917. In Daniels v. Williams, the Court noted:
Accordingly, we need not decide whether, as petitioner contends, the possibility of a sovereign immunity defense in a Virginia tort suit would render that remedy "inadequate" under Parratt and Hudson v. Palmer, 468 U.S. 517, 104 S. Ct. 3194, 82 L. Ed. 2d 393 (1984).
474 U.S. 327, 332, n. 1, 106 S. Ct. 662, 666, n. 1 (1986). The Court also stated,
this case affords us no occasion to consider whether something less than intentional conduct, such as recklessness or "gross negligence," is enough to trigger the protections of the Due Process Clause.
Id. at 334, n. 3, 106 S.Ct. at 667, n. 3. In Nishiyama v. Dickson County, Tennessee, 814 F.2d 277, 282-283 (6th Cir.1987), the Sixth Circuit held that "gross negligence" or "reckless indifference" may establish a violation of the Due Process Clause. But see Lewellen v. Metro Gov't of Nashville, 34 F.3d 345, 350-51 (6th Cir.1994).
[2] The claimants also allege that the negligent conduct continued through the year preceding the filing of the complaint. However, neither the dates on which the civil actions against them were filed nor the dates on which false information was disseminated are stated specifically in the complaint. The complaint does state that the allegations cover negligent acts which spanned a period of time up to the dismissal of the criminal charges on October 28, 1988, thereby occurring within the limitations period. Under Rule 12 of the Tennessee Rules of Civil Procedure, applicable to proceedings before the Tennessee Claims Commission pursuant to Rule 03101-1-.01 of the Rules of the Tennessee Claims Commission, allegations of negligent acts within the limitations period are sufficient to overcome a motion to dismiss grounded on the statute of limitations. Cook v. Spinnaker's of Rivergate, Inc., 878 S.W.2d 934, 938 (Tenn. 1994). Nevertheless, the claimants' position on appeal is that the causes of action accrued upon the dismissal of the indictments, rather than any later date. Consequently, that is the only issue before the Court.
[3] However, this is not consistent with the Court's subsequent caveat, "we do not hold that any possible cause of action for prosecutorial misconduct such as a § 1983 action invariably accrues upon the return of an indictment." (Majority opinion, p. 422; see also pp. 417, 420.)
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IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
ON REMAND
NO. 3-90-092-CR
FARID BASTANI,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF BELL COUNTY, 264TH JUDICIAL DISTRICT
NO. 38,262, HONORABLE JOE CARROLL, JUDGE PRESIDING
Appellant, Farid Bastani, was convicted in district court of aggravated sexual
assault of a child. Tex. Penal Code Ann. § 22.021 (1989). Punishment was assessed by the jury
at ten years' imprisonment in the Texas Department of Criminal Justice, Institutional Division.
On appeal to this Court, we held in an unpublished opinion that the final argument
of the prosecution constituted an improper, indirect comment on appellant's failure to testify at
the trial. (1) However, we also held that the instructions and actions of the trial court rendered the
error harmless, thus affirming the district court judgment of conviction. The Court of Criminal
Appeals granted appellant's petition for discretionary review and in an unpublished opinion
concluded that we had conducted an improper harm analysis. (2) That Court reversed and remanded
the cause to us for a complete harm analysis pursuant to Tex. R. App. P. Ann. 81(b)(2) (Pamph.
1992). We will recite the factual background of this case in order to place the harm analysis in
context.
Appellant was convicted of the aggravated sexual assault of his thirteen-year-old
stepdaughter. The stepdaughter testified that the assault occurred on Labor Day weekend of 1989,
while her sister and mother were out of town and she was home alone with appellant. Other than
the complainant and appellant, there were no other witnesses to the occurrence. Appellant, as was
his constitutional right, chose not to testify at the trial.
Appellant complained that the final argument of the prosecuting attorney contained
impermissible comments regarding his failure to testify at the guilt/innocence stage of the trial.
At the time of the complained-of arguments, the prosecutor was discussing the evidence, which
consisted of testimony from the child complainant and from a doctor. Defense counsel had argued
that the complainant had a motive to lie and that the medical testimony did not support the
accusation. In response, the prosecutor stated:
[PROSECUTOR]: You remember when I told you during voir dire, I said `the
focus of this case, the issue is going to come down,' you
know, I don't care how you cut it, the question is going to
come down to `do you believe [the complainant].' Bottom
line. Because the medical, I think, supports what she said,
but it doesn't tell you who did it. And the only person that
told you who did it was [the complainant]. (3)
[DEFENSE]: At this time, Your Honor, we would move for a mistrial
upon the grounds in direct violation of Article 38.08, (4)
prejudicial to the rights of this defendant--
The Court: Overruled.
[PROSECUTOR]: Judge I'm commenting--
[DEFENSE]: -- subject to my --
[PROSECUTOR]: Thank you, Judge.
The Court: Overruled.
[DEFENSE]: Subject to my objection -- motion, without waiving and
insisting on it. I object to that last statement. Move the
court to instruct the jury not to consider it for any purpose,
upon the grounds it was, and was intended to be, an indirect
reference to -- in violation -- matter in violation of Article
38.08.
The Court: All right. I'll overrule it.
Later during closing argument, the prosecutor asked the jury to believe the
complainant, stating she had done everything a child should do in testifying and revealing what
had happened to her. In response to an argument by defense counsel that no man would have
stopped his actions and not had sexual intercourse the way the complainant had testified, the
prosecutor stated:
[PROSECUTOR]: Why would a man stop. Well, maybe a man -- a stepfather
-- felt guilty about what he was doing. Why would a man
have a restraint if he went that far. Maybe he realized what
he was doing was not right. There has been no evidence to
come in and contradict the testimony of [the complainant].
[DEFENSE]: If the Court please. At this time I move the Court for
mistrial upon the grounds counsel has--
[PROSECUTOR]: Judge, may I finish my response.
[DEFENSE]: --Violation of Article 38.08, and it's highly prejudicial. It's
prejudicial [sic], the Defendant can't have a fair trial.
The Court: Mr. Garza, did you have something?
[PROSECUTOR]: I'd like to complete my statement, Judge.
The Court: Go ahead.
[PROSECUTOR]: There is no evidence to impeach [the complainant] as to the
events that she told you about.
[DEFENSE]: We have --
[PROSECUTOR]: The only --
[DEFENSE]: We move --
[PROSECUTOR]: -- evidence --
The Court: Just a moment. Go head. [sic]
[PROSECUTOR]: The only evidence that has been brought to you, folks, has
been this photograph, and the what-if questions to Dr.
Nickel about the medical testimony.
[DEFENSE]: If the Court please. We would like to renew our motion --
our first one. And we'd make a second one on the last
statement about impeachment, on the same ground each
motion -- on the grounds of violation of Article 38.08 taken
in context with the rest of his argument and our position.
And so inflammatory and prejudicial, the Defendant can't
receive a fair trial.
The Court: All right, Mr. Dunham. I will sustain your objection. And
I will again instruct the jury, as I previously instructed, to
disregard the last argument of counsel.
[DEFENSE]: Your Honor, you need to rule on my Motion for Mistrial.
Each one.
The Court: And I will instruct the jury further as I did instruct them
awhile ago, to remember about the law that it permits the
Defendant to testify in his own behalf, but it provides his
failure to testify shall not be considered, and you will not
consider it or allude to it in any manner. And I believe that
your objection should be sustained. And State's counsel
will be instructed not to argue along that line.
[DEFENSE]: What's the Court --
The Court: I'll overrule your Motion for Mistrial.
[DEFENSE]: Both of my motions.
The Court: Well, the only Motion for Mistrial that I remember, I'm
overruling.
[DEFENSE]: Well, I made both of them. The first one when he said it's
undisputed. And the next one when he said there's no
evidence to impeach.
The Court: All right. Well, I will overrule both of them.
In our prior decision, we held that the prosecutor's argument was improper and
constituted an indirect comment on appellant's failure to testify in violation of his privilege against
self-incrimination contained in article I, Section 10 of the Texas Constitution and article 38.08 of
the Texas Code of Criminal Procedure. The Court of Criminal Appeals stated in its opinion
remanding this case that this indirect comment is one which cannot be cured by trial-court
instruction. That court has instructed us to perform a harm analysis without regard to the
"curativeness" of the instruction given. We will proceed to do so.
1. Harm Analysis
We must determine if the prosecutor's indirect comment was harmful to appellant
under the federal constitutional standard of Chapman v. California, 386 U.S. 18 (1967), or the
Texas harmless error rule as propounded by Rule 81(b)(2) of the Texas Rules of Appellate
Procedure, which provides, "If the appellate record in a criminal case reveals error in the
proceedings below, the appellate court shall reverse the judgment under review, unless the
appellate court determines beyond a reasonable doubt that the error made no contribution to the
conviction or the punishment."
The harm analysis required by Rule 81(b)(2) has been held to apply to jury
argument. See Orona v. State, 791 S.W.2d 125 (Tex. Crim. App. 1990); Griffin v. State, 779
S.W.2d 431, 433 (Tex. Crim. App. 1989). For some time now, the Court of Criminal Appeals
has implicitly rejected the notion that a violation of article 38.08, or of a defendant's self-incrimination rights, constitutes reversible error, per se. Madden v. State, 799 S.W.2d 683, 699
n.28 (Tex. Crim. App. 1990).
In determining whether the impermissible argument is harmless, we are required
to examine the error in light of the following factors: (1) the source and nature of the error;
(2) the extent to which the State emphasized the error; (3) the probable collateral implications of
the error; (4) the weight that a juror would probably place on such an error; and (5) the likelihood
that the State would repeat the error should it be declared harmless. Harris v. State, 790 S.W.2d
568, 587-88 (Tex. Crim. App. 1989). "The issue of harm must be determined from the facts of
each individual case and resolved according to the probable effect of the argument upon the minds
of the jurors, and in light of the existence of the other evidence in the record." Lopez v. State,
793 S.W.2d 738, 743 (Tex. App. 1990), pet. dism'd, 810 S.W.2d 401 (Tex. Crim. App. 1991).
The error here involves jury argument at the guilt/innocence phase of the trial. The
case at bar was hotly contested and the credibility of the complaining witness was crucial. The
defense had vigorously cross-examined the complainant and attacked her credibility. The
complained-of argument violated a mandatory state statute, article 38.08, and the error was of
constitutional dimension under both the federal and state constitutions. The comments were made
during the prosecution's final rebuttal argument at a point in time when defense counsel could not
respond and shortly before the case would go to the jury for deliberations. The offending
argument was made repeatedly, either four or five times, over the sustained objections of defense
counsel and admonitions of the trial court. In fact, the improper prosecutorial comments
continued after an admonition by the trial judge that a mistrial might follow if further violations
occurred. A review of the entire record and final argument leads us to the conclusion that the
prosecutor improperly injected the issue of appellant's failure to testify into the trial. We are
unable to conclude beyond a reasonable doubt that this error did not contribute to the jury's
verdict of guilty.
Accordingly, the judgment of conviction is reversed and the cause is remanded for
a new trial.
Mack Kidd, Justice
[Before Justices Powers, Jones and Kidd]
Reversed and Remanded
Filed: August 12, 1992
[Do Not Publish]
1. Bastani v. State, No. 3-90-092-CR (Tex. App.--Austin, Apr. 17, 1991) (not designated for
publication).
2. Bastani v. State, No. 678-91 (Tex. Crim. App.--Mar. 11, 1992) (not designated for
publication).
3. All emphasis supplied.
4. Tex. Code of Crim. Proc. Ann. art. 38.08 (1979) states, "Any defendant in a criminal
action shall be permitted to testify in his own behalf therein, but the failure of any defendant
to so testify shall not be taken as a circumstance against him, nor shall the same be alluded
to or commented on by counsel in the cause."
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IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-241-CV
BASTROP CENTRAL APPRAISAL DISTRICT
AND BASTROP COUNTY APPRAISAL REVIEW BOARD,
APPELLANTS
vs.
VERNON L. FRAMPTON,
APPELLEE
FROM THE DISTRICT COURT OF BASTROP COUNTY, 21ST JUDICIAL DISTRICT
NO. 19,310, HONORABLE JOHN L. PLACKE, JUDGE PRESIDING
In this ad valorem tax case, Vernon L. Frampton successfully challenged the denial
of open-space timber valuation on land he owns in Bastrop County. Based upon a jury verdict,
the trial court rendered judgment that 67.43 acres qualify for tax exemption. See Tex. Const. art.
VIII, § 1-d-1(a); Tex. Tax Code Ann. §§ 23.71-.79 (1984 & Supp. 1992). The Bastrop County
Appraisal District and Bastrop County Appraisal Review Board (hereafter collectively, the
"District") appeal.
Frampton applied for timber-use valuation seeking to have approximately 107 acres
of land valued for ad valorem tax purposes in accordance with Subchapter E of the Texas Property
Tax Code. See Tex. Tax Code Ann. § 23.75 (Supp. 1992). The District approved the
designation only as to forty acres. Frampton pursued an appeal in district court, and the jury returned a verdict in his favor on the remaining 67.43 acres. The trial court rendered judgment
for Frampton, ordering the property designated open-space timberland for 1988 and 1989, and
awarding him $2500 attorney's fees. We will affirm the judgment with respect to the timber-use
exemption and reverse the judgment on the issue of attorney's fees.
The Texas Constitution permits the legislature to tax open-space timber land on the
basis of its productive capacity. Tex. Const. art. VIII, § 1-d-1; see also Riess v. Williamson
County Appraisal Dist., 735 S.W.2d 633, 637 (Tex. App. 1987, writ denied). Land qualifies for
timber-use valuation if
it is currently and actively devoted principally to production of timber or forest
products to the degree of intensity generally accepted in the area with intent to
produce income and has been devoted principally to production of timber or forest
products . . . for five of the preceding seven years.
Tex. Tax Code Ann. § 23.72 (Supp. 1992). The burden of showing that the land meets these
qualifications is on the applicant. See Gragg v. Cayuga Indep. Sch. Dist., 539 S.W.2d 861, 869
(Tex.), appeal dism'd, 429 U.S. 973 (1976). The appraisal office can then appraise the value of
land that qualifies on the basis of the category of land in accordance with "accepted income
capitalization methods applied to average net-to-land," as defined by statute. See Tex. Tax Code
Ann. § 23.71 (1982); 1981 Tex. Gen. Laws, 1st C.S., ch. 13, §73, at 145 (Tex. Tax. Code Ann.
§ 23.73(b), since amended). In other words, land principally devoted to timber production is
appraised on the basis of its capacity to produce marketable timber. Thus, section 23.72 sets out
the conditions for determining whether property qualifies as timber land and, if so, section 23.73
provides the method for appraising the timber-productivity value. As directed by the legislature,
the State Property Tax Board (1) developed a manual of guidelines for use by each appraisal office
in appraising qualified timber land and established rules of procedure for use by the appraisal
office in verifying that land meets the conditions of § 23.72. Tex. Tax Code Ann. § 23.73(b).
Frampton first applied for timber-use valuation on his property in 1988. His forty
acres of property was the first tract ever to be approved in the county. The appraisal office denied
other landowners' requests for timber valuation in 1985 and 1988, but granted one request in
1988. The District had no local guidelines until late 1989.
The District argues on appeal that Frampton failed to prove his land qualifies for
timber valuation because he failed to satisfy the criteria the District employs to appraise qualified
land. Specifically, Framptom did not follow the District's "step-by-step calculations in order to
prove a net-to-land figure." This contention was not argued at trial below. The District claims
additionally that Framptom failed to prove he intends to produce income because he failed to
prove his land produces a rate of growth sufficient to support a commercial timber operation.
The jury was asked to decide whether Frampton's property qualified for the
exemption; it was not asked to appraise its value. The question inquired:
Do you find from a preponderance of the evidence that for the . . . years [1988 &
1989] the property was currently and actively devoted principally to production of
timber or forest products to the degree of intensity generally accepted in the area
with intent to produce income and has been devoted principally to production of
timber or forest products for five of the preceding seven years?
(Emphasis added). In connection with the inquiry, the jury was instructed that the emphasized
portion
means that the existing timber resources are sufficient to warrant management for
commercial production or the land resource is being developed and managed for
the production of timber. . . . Such lands are often referred to as commercial
forestland. Generally excluded . . . are lands which have trees . . . but are
incapable of producing at least 20 cubic feet of fiber per year.
(Emphasis added). The jury answered in Frampton's favor, which it could do if it was persuaded
that Frampton's land is (1) currently and actively (2) being developed and managed for the
production of timber (3) with intent to produce income, (4) and has been so used for the time
required. Although the jury was instructed that land incapable of producing at least twenty cubic
feet of wood fiber per year generally does not qualify, this level of growth is not mandatory for
qualification; the jury was not instructed it must find that amount of growth.
The District now asserts on appeal that Frampton failed to prove other required
elements of his case. The District did not object to the jury charge below, however, and does not
complain of it here. The charge inquired only as to the single issue and the related special
instruction set out above. The District did not request, by instruction or definition, factors
asserted here, and the District does not suggest additional matters should have been submitted.
To the extent the District attempts to complain that there were additional facts for the jury to
determine, any error is waived.
TAX EXEMPTION
The District complains generally that the evidence is legally and factually
insufficient to support the jury's verdict. Rather than addressing its complaints to any error made
by the trial court or challenging the judgment as improper, however, the District argues against
the weight given to and credibility of the evidence relied upon, matters within the jury's sole
province. In effect, the District argues Frampton's evidence is not credible and should be given
no weight, while the District's evidence is conclusive, binding, and must be believed.
In its first six points of error, the District complains that the record contains no
evidence or, alternatively, insufficient evidence to support the jury's verdict, particularly its
finding that Frampton operated "with intent to produce income." Even if Frampton's testimony
constitutes some evidence, the District argues that the finding is against the great weight of all the
evidence. The District contends that Frampton's evidence in support of the verdict constitutes no
evidence because it does not comply with the Tax Code and step-by-step valuation calculations
in the District's manual; and, the District's evidence does comply and, therefore, is conclusive.
To prove land is timberland, the District contends that lay opinion testimony is incompetent and
expert testimony is required. Because Frampton offered no expert testimony, the District's
testimony is dispositive. The District asserts that its expert's opinion affirmatively proves that
Frampton could never intend to manage the land with an intent to produce income, as required.
In its eighth point, the District simply complains without citation of authority that the jury verdict
is inequitable and wrong.
In reviewing a no-evidence challenge, we must consider only the evidence and
reasonable inferences tending to support the verdict and disregard all evidence and inferences to
the contrary. If any evidence of probative value exists that supports the finding, we must affirm
the jury verdict and the challenge must fail. King v. Bauer, 688 S.W.2d 845, 846 (Tex. 1985);
Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965). In reviewing a factual-sufficiency challenge,
we must review all the evidence to determine whether the evidence is insufficient or if the verdict
is so against the great weight and preponderance of the evidence as to be clearly wrong and
manifestly unjust. Sosa v. City of Balch Springs, 772 S.W.2d 71, 72 (Tex. 1989); In re King's
Estate, 244 S.W.2d 660, 661 (Tex. 1951); see also Pool v. Ford Motor Co., 715 S.W.2d 629
(Tex. 1986); see generally William Powers, Jr. and Jack Ratliff, Another Look at "No Evidence"
and "Insufficient Evidence," 69 Tex. L. Rev. 515 (1991).
The District's underlying position is that the issue of whether land qualifies as
timberland involves "highly technical matters" requiring "great technical expertise" about which
only a scientific expert is competent to offer an opinion. For this reason, the District contends,
only its expert's opinion was competent proof, and because the District's expert was the only
expert who testified, his testimony was conclusive. See, e.g., Exxon Corp. v. West, 543 S.W.2d
667 (Tex. Civ. App. 1976, writ ref'd n.r.e.). Frampton concedes that he is not a forestry expert.
Opinion testimony does not establish a material fact as a matter of law; an expert's
opinion, even when uncontroverted, is not conclusive and binding on the jury unless the subject
is one for experts alone, where the jury cannot be expected to form correct opinions based upon
the evidence as a whole, aided by their own experience and knowledge. McGalliard v.
Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986). The District cites no authority for its position that
this is such an instance. We do not believe that the subject in issue, particularly a landowner's
intent with respect to his property, is one solely for experts. Intent is almost always a question
within the jury's province. Valley Stockyards Co. v. Kinsel, 369 S.W.2d 19, 20 (Tex. 1963).
Generally, a landowner is entitled to give an opinion on the use and value of his own property
without being an expert. Grayce Oil Co. v. Peterson, 98 S.W.2d 781, 783 (Tex. 1937). The jury
decides the credibility and weight the testimony should be given. Benoit v. Wilson, 239 S.W.2d
792, 796 (Tex. 1951).
Further, the District suggests that it objected to the competence of Frampton's
evidence, exhibits, and testimony of his witnesses. The record does not support this contention.
The District did not challenge any witness as incompetent, move to strike any evidence or
testimony, request a limiting instruction or the like, or object to any exhibits except perhaps
Frampton's exhibit twenty-nine. The District refers us to more than three-hundred pages of the
statement of facts as its specific reference to the place in the record where error occurred. The
District does not direct any of its complaints by point of error to any ruling by the trial court, save
one.
In its fifth point of error, the District claims that the trial court erred by overruling
its objection to Frampton's lay-opinion testimony because Frampton was incompetent to testify
on the subject. The record reflects that, without objection, Frampton testified at length about his
land-management plan, commercial sales, related income and expenses incurred, the timber
inventory on his property, and the method he employed in measuring the property's inventory and
calculating its ability to sustain growth. The court admitted the many exhibits without objection.
Frampton then identified exhibit twenty-nine, a 1989 summary he compiled from his personal
measurements and calculations of the volume in cubic feet of stems he believed present on the
property, excluding oak but including pine and cedar. His data showed his property could sustain
approximately 400 cubic feet per acre of increased wood-fiber growth annually, and he explained
at length his method of reaching this total. Finally, an unidentified summary of the results of his
calculations, presumably exhibit twenty-nine, was admitted over the District's objection that
"there has been no predicate laid that Mr. Frampton used any of the accepted measures of the
industry to make these determinations, that he has the expertise necessary to do that." If any error
was preserved, it was with respect to admission of this exhibit only, which the District does not
challenge on appeal.
In cross examination and through its expert, the District attacked the credibility and
reliability of Frampton's assertions and calculations, especially on the basis that experts contend
very little land in Texas can produce even 165 cubic feet of growth per acre per year. The jury
did not have to believe all of Frampton's figures; it needed to be persuaded only that the property
was being managed with intent to produce timber income. Even if the property must be capable
of producing adequate annual growth, twenty cubic feet per acre is not absolutely required.
The evidence shows that Dr. Vernon Frampton bought the 107.43 acres in 1947
when his son Jerry was one-year old. Jerry lived with his wife on the property from 1972 until
1976. Vernon Frampton and his son Jerry Frampton had pastured cattle on the property but
removed the cattle in 1972 in order to foster the spread of pine trees. Their goal is to encourage
the growth of pine and cedar trees on their land, and eventually develop a forest of loblolly pine.
Aerial and other photos reveal pine and cedar growing on the property, as well as oak.
Since 1976, both men had been actively developing and managing the 107 acres as
a single tract of timberland. Each described his management efforts to encourage the spread of
pine trees throughout the property. These efforts included consulting with the Texas Forest
Service in 1976; culling oak hardwood; cutting firebreaks and roads; and selling pine or cedar in
1981, 1982, and 1989. Their efforts have resulted in the spread of pine and, for the moment,
cedar. They planted pine seedlings on one and one-half acres of the tract in dispute. In 1976,
twenty-seven acres out of the 107 was certified as a tree farm by the Texas Forest Service for the
American Tree Farm System. In 1986, the amount was upgraded to 100 acres. By 1988, 42.84
acres of the 107 acres was predominantly pine forest of commercial quantity. The District
eventually approved forty acres of this portion as timberland. The rest of the land is being
developed toward that goal. The disputed property contains a mixture of hardwood, cedar, and
pine, and there are now pockets of pine trees throughout the sixty-seven acres. Efforts to
encourage the spread of pines throughout the entire area have been successful. The property is
in transition to pine, with cedar intermittent. The men also described their work marketing timber
and wood products and developing a timber business for themselves and for the county. They
have contacted potential customers, some of whom have visited the property, and have made some
commercial sales of oak, pine and cedar.
Jerry Frampton has served as President of the Lost Pines Timber Growers
Association, trying to help develop the industry. He testified to a range of time devoted to the
project and this property, at times expending twenty to forty hours per month, sometimes eighty,
on the land management, the association, developing the timber industry, markets, and the like.
Vernon Frampton expends more than forty hours a month on this work. He believes the value
of his standing timber has been increased as a result of his efforts.
Vernon Frampton is a retired research chemist with a doctor of philosophy degree
in biochemistry and a minor in "mathematic physics," but he did not testify as an expert. He
testified that since 1972 he has been engaged in a continuous program of managing the property
toward the goal of developing a forest of loblolly pine in order to produce forest timber or forest
products. He described his efforts to determine the volume of timber on his property and its
annual rate of growth. He took sample plots and attempted a month long inventory of tree
products on the entire property by type, size and number. Frampton explained the means he
employed of measuring his trees. Using high-school level math he calculated the volume of wood
fiber on his land and its annual growth. Frampton freely admits he did not use any one of three
industry-accepted conversion tables in his calculations, these being unreliable in his opinion
because they underestimate the board-foot volume of a log and are inconsistent among themselves.
He concluded that his sixty-seven acres of land realized an increased growth of approximately 400
cubic feet of wood fiber per acre per year. The amount of growth is higher on the sixty-seven
acres than the pines on the forty acres. In his opinion, all 107 acres is being currently and actively
devoted principally to the production of timber or forest products with even greater intensity than
that of other tree farmers in the county. Although his timber business has been operating at a net
loss, Frampton insists that future prospects are optimistic and could be profitable.
Carl Bradford testified that he had spent ninety hours on the property cutting
pulpwood, that being oak, not pine or cedar. Bradford testified that in 1985, he cut twenty-two
cords of oak from Frampton's land; in 1990 he cut sixteen cords from seven-tenths of one acre
on the 67 acre tract; the area where he cut is "just about all pine and cedar now;" he has observed
a change in composition of the forest over the last six years; and there are pine and cedar
seedlings over most of the area.
Austin Wampler has been in the business of buying, logging, saw-milling and
processing timber in Bastrop County for twenty-seven years. He testified that many products can
be produced from timber besides lumber; that every bit of wood has a marketable use; that the
Doyle scale, one of the industry-accepted methods for measuring wood volume, underestimates
wood volume by fifteen to twenty per cent; that wood fiber can produce a volume of wood
shavings five times greater than the solid wood; that he pays ten dollars per cord for wood; and
that only an area of 1.5 acres out of Frampton's sixty-seven acres has been cleared of timber.
The District's expert, Charles Burditt, a forestry consultant for eleven years,
testified that from his calculations using the Doyle log rule scale, the volume of wood on the
sixty-seven acres is extremely low and in his opinion not sufficient to justify a commercial
operation. He discredited Frampton's inventory and calculations, and explained the accepted
method he, Burditt, used. He testified that Frampton's calculations would mean this property far
exceeds the best timberland in East Texas. Burditt disagrees that the sixty-seven acres ever will
produce twenty cubic feet of growth per acre per year; estimates it produces less than ten cubic
feet per acre per year, rather than 400; does not believe the land can produce a profit; and would
not recommend Frampton pursue a commercial operation. Burditt testified that the sixty-seven
acres contains almost no pine. During his first visit, he inspected only about two acres out of the
sixty-seven and took no measurements. During the second visit, he collected data on the forty
acres, while another expert examined the property now in dispute. The two combined to prepare
their findings, but Burditt did not actually gather the data.
In his preliminary report to the District in 1988 Burditt stated his opinion that the
"land owner is doing an excellent job of land stewardship . . . demonstrated by his obvious
interest in converting the acreage into more productive timber land. The approach to making this
conversion is a sound one." Nevertheless, he determined that the commercial value was marginal.
The District's local guidelines for Bastrop County now suggest that property have
a minimum site index of sixty-five in order to qualify for timber valuation. Site index is one
factor examined to determine a property's capacity to produce growth. Burditt took tree borings
on the forty acres and determined that it has an actual site index of sixty. (2) Burditt did not take
any borings, take any soil samples, or determine the site index for the sixty-seven acres in dispute.
He does not explain his method of determining its annual growth rate. Burditt nevertheless
concluded from looking at the growth that since there was "a fully stocked stand of hardwood
already there that wasn't producing 20 cubic feet I had to decline in approving the area."
Burditt agreed that had he not been on the property to make his own assessment,
he would have relied upon Soil Conservation Service maps and charts to assess the property's
ability to produce annual growth. While testifying, Burditt examined, compared, and interpreted
various maps and charts from the Texas Forest Service and the Soil Conservation Service and
testified that according to these, most of the sixty-seven acres has a site index of seventy, better
than that of the forty-acre tract, and is best suited for growing pine. Burditt conceded that from
looking only at these items the sixty-seven acres has a better site index and lower seed mortality
rate than the forty acres, and could produce more wood fiber per acre. A site index of this level
could have an estimated capability of producing in the range of fifty to eighty-four cubic feet of
wood per acre per year.
The jury was called upon to decide whether the property qualified for timber-use
valuation under the test of § 23.72. The District primarily complains that Frampton failed to
prove he intended to produce income from the property. We hold that the evidence is both legally
and factually sufficient to support the jury's affirmative verdict. The record contains ample
probative evidence on which the jury could render its verdict, and its answer is not against the
great weight of all the evidence. We overrule the District's points of error one through six and
eight.
ATTORNEY'S FEES
In its seventh point of error, the District complains that the trial court erred in
awarding Frampton attorney's fees. Frampton relies upon May v. Appraisal Review Bd. of
Tarrant Appraisal Dist., 794 S.W.2d 906 (Tex. App. 1990, writ denied). The Texas Supreme
Court, however, has recently held that a taxpayer who successfully challenges the denial of open-space land designation is not entitled to recover attorney's fees. Dallas Central Appraisal Dist.
v. Seven Inv. Co., 32 S.Ct.J. 856, 860 (June 10, 1992). We sustain the District's seventh point
of error.
CROSS POINT
Frampton complains by cross-point that the trial court erred by rendering judgment
without permitting him to complain of the District's denial of his 1990 application for timber-use
valuation. The jury returned its verdict in March 1990. In August 1990, without leave of court,
Frampton filed an amended petition in this cause complaining of denial for 1990. The trial court
rendered judgment on the verdict and signed the judgment February 26, 1991.
Frampton contends that he had an absolute right to amend his pleadings to add later
tax years so long as the appeal for review was pending in the trial court and thereafter was entitled
to another jury trial. Tex. Tax Code Ann. § 42.21(c) (Supp. 1992). The statute permits the
taxpayer to amend a pending action or file a separate cause. Frampton attempted the former. A
party is not entitled to amend his pleadings within seven days of trial, or after verdict, without
leave of court. Tex. R. Civ. P. Ann. 63 (Supp. 1992). We overrule Frampton's cross-point.
For the reasons set forth above, we reverse the portion of the judgment that awards
attorney's fees to Vernon L. Frampton and render judgment denying Frampton recovery for such
fees. The remainder of the judgment is affirmed.
Marilyn Aboussie, Justice
[Before Chief Justice Carroll, Justices Aboussie and Kidd]
Affirmed in Part; Reversed and Rendered in Part
Filed: July 1, 1992
[Do Not Publish]
1. In 1991 the Legislature placed this responsibility on the comptroller. See 1991 Tex. Gen.
Laws, 2nd C.S., ch. 6, § 26, at 30 (amending Tex. Tax Code Ann. § 23.73(b)).
2. As a general rule, a site index of sixty means that over fifty years a tree on the property
will grow sixty feet tall.
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91 N.J. Super. 281 (1966)
219 A.2d 899
GEORGE J. BUSCH, JR., PLAINTIFF,
v.
HELEN BUSCH, DEFENDANT.
Superior Court of New Jersey, Chancery Division.
Decided May 6, 1966.
*283 Mr. Benjamin D. Braelow argued the cause for plaintiff.
Mr. Barry R. Mandelbaum argued the cause for defendant-counterclaimant (Messrs. Irving & Barry R. Mandelbaum, attorneys).
CONSODINE, J.C.C. (temporarily assigned).
This court entered a judgment nisi in favor of defendant-counterclaimant for divorce upon the ground of extreme cruelty and ordered that plaintiff pay to her the sum of $150 per week as alimony as well as certain payments for hospital, medical and surgical bills, prior maintenance and counsel fees and costs.
The Plaintiff appealed. He filed his notice of appeal within the time provided by the rules and posted security for the preparation of the transcript. The transcript of the trial proceedings was lodged with the Clerk of the Superior Court, Appellate Division, thereby requiring plaintiff to file his brief in accordance with the rules within 30 days. That period of time has passed. No brief has been filed in the Appellate Division. Plaintiff has not made application to this court or the Appellate Division for a stay of the mandate and terms and provisions of the judgment nisi. The terms and provisions of that judgment are still operative.
This conclusion is supported by the rules of the court. Plaintiff argues that the notice of appeal per se stays not only *284 the judgment nisi as to the divorce, but also all its other terms and provisions.
The issues here are:
1. Whether the terms and provisions of the judgment nisi are automatically stayed by the filing of the notice of appeal.
2. Whether the conduct on the part of plaintiff in disobeying and disregarding the terms and provisions of the judgment nisi constitute contumacious conduct so that he should be cited in contempt.
3. Whether a writ of execution should issue against plaintiff's property.
4. Whether the court should issue a writ of sequestration to attach plaintiff's property and appoint a receiver to administer said property and sell the same in order to satisfy the terms of the said judgment.
5. Whether an injunction should issue restraining plaintiff from transferring his property.
The rules of court are unequivocal in declaring that the filing of a notice of appeal and the transcript of the proceedings does not automatically stay the mandate or terms and provisions of the judgment appealed. R.R. 1:4-6(b) provides that performance of a judgment and the proceedings to enforce it shall be stayed provided that a supersedeas bond is given or a cash deposit made and the notice of appeal has been filed. R.R. 1:4-7 provides that prior to the time that the brief on appeal has been filed, an application for an order requesting a stay shall be made to the trial court from which the appeal is being taken. R.R. 1:4-8 sets forth the terms and provisions in respect to the posting of a supersedeas bond or cash deposit.
Moreover, R.R. 4:64-1 provides that unless the court otherwise orders, execution may issue upon a judgment and proceedings taken for its enforcement forthwith upon its entry. In addition, R.R. 4:64-2 provides that the performance of any judgment shall not be stayed unless the court so orders.
*285 Defendant, therefore, comes into this court under the authority so provided by the rules and requests that the court grant the appropriate relief for the enforcement of the terms and provisions of its judgment nisi.
R.R. 4:98-9 (c) provides that when a person fails to make payments as directed by an order or judgment of the matrimonial court, any aggrieved party may apply for relief in accordance with R.R. 4:87-5. R.R. 4:87-5 provides the machinery for holding a person in contempt for failure to comply with an order of the court.
There is outstanding the mandate of the judgment entered by this court which plaintiff has chosen to ignore and disobey. The failure of a divorced husband to make the required payments of alimony amounts to contempt when he has had the ability to make the payments, had he desired to do so. 10 N.J. Practice p. 600. (Marriage, Divorce and Separation) (3d ed.) The record shows that the plaintiff has such ability.
Initially, pending appeal, the order requiring a husband to pay alimony could not be enforced by contempt. Robinson v. Robinson, 86 N.J. Eq. 165 (E. & A. 1934). However, the promulgation of R.R. 1:4-6 et seq. amended this so that in the absence of a stay the trial court may cite the disobedient party in contempt. 10 N.J. Practice, above, at p. 600.
Defendant has already docketed with this court pursuant to N.J.S. 2A:16-18 et seq., an abstract of the judgment nisi in so far as it concerns counsel fees and costs, and payments of monies due to her.
The rules of court are clear that application need not be made to this court for the issuance of a writ of execution. As stated, R.R. 4:64-1 et seq. provides that a party may proceed to enforce a judgment provided that no stay has been ordered by the court. R.R. 4:74-1 provides that process to enforce a judgment for the payment of money, other than alimony awarded in a matrimonial action, and process to collect costs allowed by a judgment or order, shall be a writ *286 of execution except where the court otherwise orders. A party may secure a writ of execution, without the order of this court, to enforce the provisions of a judgment nisi that has been docketed.
Upon default in complying with any order as to alimony or maintenance of the wife, the court may award and issue process for the immediate sequestration of the personal estate, and the rents and profits of the real estate, of the party so charged, and appoint a receiver thereof to apply such personal estate and the rents and profits of the real estate, or so much thereof as shall be necessary, towards such alimony and maintenance as to the court shall from time to time seem reasonable and just. Cf. N.J.S. 2A:34-23. This statute is remedial and should be construed liberally. Lynde v. Lynde, 64 N.J. Eq. 736 (E. & A. 1902).
Generally, under N.J.S. 2A:34-23, sequestration is final process in alimony cases and the personal estate and the rents and profits of the real estate of the husband are applied towards the order for alimony and maintenance. A court of equitable jurisdiction possesses inherent power to issue a writ of sequestration in order to preserve property and to enforce compliance with any order or judgment the court may deem to be necessary. 10 N.J. Practice, above, at p. 303.
Fischer v. Fischer, 24 N.J. Super. 180 (App. Div. 1952), held that a divorced husband has a duty to comply with an alimony judgment; that his income and property are subject thereto, and that these may be proceeded against by sequestration.
R.R. 4:77-24 provides that the court may order sequestration of his real and personal estate, or so much thereof as may be sufficient to satisfy the judgment or order of the court. Under the circumstances presented here, a writ of sequestration should be issued and a receiver appointed for the property of plaintiff.
Defendant has stated in her affidavit that she is fearful her husband will transfer and assign his assets to avoid payments which are now due, and furthermore, to preclude *287 her from obtaining future payments of alimony. If such a transfer is made by plaintiff, defendant will obviously sustain substantial and irreparable damage. There is ample authority for the issuance of an order enjoining a husband from conveying away or disposing of his property in order to preclude his wife from recovering past due alimony payments as well as payments to accrue in the future. 10 N.J. Practice, above, at p. 600; David v. David, 111 N.J. Eq. 493 (E. & A. 1932); Clark v. Clark, 13 N.J. Misc. 49, 176 A. 81 (Ch. 1935); Baskinger v. Baskinger, 129 N.J. Eq. 224 (Ch. 1941). The record before this court presents substantial grounds for the issuance of the injunction sought by the defendant.
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336 S.W.2d 729 (1960)
E. C. HEARD, Administrator, Estate of Mary L. Heard deceased, Plaintiff-Appellant,
v.
ESTATE of J. Grant FRYE, deceased, Defendant-Respondent.
No. 7806.
Springfield Court of Appeals, Missouri.
April 27, 1960.
*730 Eugene V. Krell, St. Louis, for plaintiff-appellant.
Vogel & Frye, Wm. H. Frye, Cape Girardeau, for defendant-respondent.
RUARK, Judge.
This is an appeal "from the judgment entered in favor of the * * * defendant, by virtue of overruling plaintiff's motion for new trial on the 29th day of April, 1959."
On January 3, 1957, plaintiff filed an action against the estate of Grant Frye, deceased. On January 17, 1957, defendant filed motion to dismiss because the petition failed to state facts upon which the relief prayed for could be granted.
On July 1, 1957, the motion to dismiss was sustained. On September 19, 1957, plaintiff filed a motion to set aside the dismissal and reinstate the cause on the docket. The reason assigned in such motion was that plaintiff had no notice of the hearing on the motion to dismiss and no notice of the court's action in sustaining it.
On November 4, 1957, the plaintiff's motion was taken up, submitted to the court, and overruled.
On November 16, 1957, plaintiff attempted to appeal from the order of the court overruling the motion to reinstate. We held this to be too late and dismissed the appeal (see Heard v. Estate of J. Grant Frye, Mo.App., 319 S.W.2d 685).
On February 3, 1959, plaintiff filed in the circuit court his application for leave to file amended petition. Also on the same date plaintiff filed his motion for new trial (stated to be in the alternative if the court should deny the application for leave to file amended petition). The application was set for hearing on February 12 and on that day was argued and taken under advisement. On March 9, the plaintiff's presentiment proved to be correct and the motion for leave to file amended petition was overruled.
On April 30, 1959, the plaintiff's motion for new trial was argued, submitted, and overruled, and on the same day he appealed as above stated.
In general, the sustaining of a motion to dismiss for failure to state a cause of action, and the dismissal of the case without further order, is a dismissal with prejudice and a final appealable judgment.[1] But if the dismissal is without notice and an opportunity to be heard, it is not an involuntary dismissal which forecloses the plaintiff. Bindley v. Metropolitan Life Ins. Co., 358 Mo. 31, 213 S.W.2d 387; Levee District No. 4 of Dunklin County v. Small, Mo.App., 281 S.W.2d 614, and cases cited loc. cit. 617. This was the plaintiff's view when he filed his motion to reinstate on September 19, 1957. The effect of the reinstatement would have been to vacate the judgment of dismissal. The record shows that such motion to reinstate was heard, submitted to the court, and overruled. No motion for new trial was filed. The order was appealable, whether it be considered as a special order after judgment under Section 512.020 RSMo 1949, V.A.M.S., (Mandel v. Bethe, Mo.App., 170 S.W.2d 87; State ex rel. Potter v. Riley, 219 Mo. 667, 118 S.W. 647, 656) or as an independent motion to vacate for irregularity. In re Jackson's Will, Mo.App., 291 S.W.2d 214; Edwards v. Rovin, Mo.App., *731 322 S.W.2d 139, 142; Audsley v. Hale, 303 Mo. 451, 261 S.W. 117; Suess v. Motz, 220 Mo.App. 32, 285 S.W. 775; Scott v. Crider, 217 Mo.App. 1, 272 S.W. 1010. Thus the plaintiff has had his day in court on the questions raised by such motion, and the court's judgment on that became final and res judicata on the question. Bennett's Adm'r v. Russell, 39 Mo. 152, 90 Am.Dec. 457; State ex rel. L. J. Mueller Furnace Co. v. Buckner, 207 Mo.App. 48, 229 S.W. 392; Drainage Dist. No. 1 Reformed, of Stoddard County v. Matthews, Mo., 234 S.W.2d 567, 572; see 30A Am.Jur., Judgments, § 347, p. 388, § 360, p. 401; Johnson v. Latta, 84 Mo. 139; Snodgrass v. Copple, 203 Mo. 480, 101 S.W. 1090, 1093.
A motion for new trial filed one year and three months after the order denying plaintiff's motion to reinstate comes too late to confer the grace of postponement of finality. Section 510.340. Otherwise there would be no end to litigation.
The judgment is affirmed.
STONE, P. J., and McDOWELL, J., concur.
NOTES
[1] Section 510.150 RSMo 1949, V.A.M.S.; Jones v. Williams, 357 Mo. 531, 209 S.W.2d 907; Coyne v. Southwestern Bell Telephone Co., 360 Mo. 991, 232 S.W.2d 377; Frank v. Sinclair Refining Co., 363 Mo. 1054, 256 S.W.2d 793; State ex rel. State Highway Commission v. Shultz, 241 Mo.App. 570, 243 S.W.2d 808; Runnion v. Paquet, Mo.App., 233 S.W.2d 803; Husser v. Markham, Mo.App., 210 S.W.2d 405; Mansfield v. Veach, 240 Mo.App. 617, 212 S.W.2d 90; Granger v. Barber, Mo., 236 S.W.2d 293.
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47 N.J. 73 (1966)
219 A.2d 413
STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
WESLEY HERMAN, DEFENDANT-RESPONDENT.
The Supreme Court of New Jersey.
Argued February 8, 1966.
Decided May 2, 1966.
*75 Mr. Brendan T. Byrne, Prosecutor of Essex County, argued the cause for appellant (Mr. Peter Murray, Assistant County Prosecutor, on the brief).
Mr. John H. Grossman argued the cause for respondent.
The opinion of the court was delivered by PROCTOR, J.
The Essex County Court permitted the defendant, Wesley Herman, to retract his plea of guilty to an indictment for robbery and to enter a plea of not guilty. After granting the State leave to appeal, the Appellate Division affirmed the order of the trial court. We granted the State's petition for certification. 46 N.J. 217 (1966).
On April 15, 1963, the defendant and one Robert Waston were indicted for robbery.[1] The indictment also contained a count charging the defendants with illegal possession of a dangerous weapon and a count charging them with atrocious assault and battery. All three counts arose from a robbery which allegedly occurred on February 7, 1963. On April 29, 1963 the defendant and Waston pleaded not guilty to the indictment.
The defendant and Waston went on trial before a jury in June 1963. During the course of the trial, on June 17, they retracted their not guilty pleas and entered pleas of guilty to the robbery count. These pleas were accepted by the trial judge and sentencing was set for July 10, 1963. Defendant's bail of $1,000 was continued.
*76 On July 10, 1963 Waston was sentenced to three to five years in State Prison for robbery, and the remaining counts of the indictment were dismissed. Herman, however, did not appear for sentencing. In fact, he was not located until January 1964. At that time he was in jail in St. Paul, Minnesota, where he was serving a 10 day sentence resulting from his participation in a fight. He was returned to New Jersey on March 17, 1964. Sentencing was fixed for April 13, 1964, at which time defendant claimed innocence and moved to withdraw his guilty plea. His alleged reason for having entered the guilty plea was set forth in the following written statement which was made at the request of his lawyer:
"The Prosecutor told my lawyer, Mr. Finch [Herman's attorney when he entered his guilty plea in June 1963], that if I kept on pushing for a trial and didn't plead guilty to robbery that he would have my bail reset at $10,000 and kick the trial around a year and I'd just sit. So I pleaded guilty and a week or so later I left New Jersey in order to make some money to return and fight it. I was on my way home from Washington State when I was apprehended."
The matter was adjourned to permit an investigation by the probation department and to give the State time to study the defendant's motion. At a hearing on May 29, 1964, defendant also alleged that when he was first arrested for the robbery he was held incommunicado by the police for six days after which he signed a confession. The trial court specifically rejected all claims that the prosecutor's office had acted improperly. However, because of what the judge called an "abundance of caution," the motion to vacate the guilty plea was granted.
We think that the trial court erred and that the defendant should be sentenced in accordance with the guilty plea he entered on June 17, 1963.
Where a plea of guilty has been entered it may not be withdrawn except pursuant to leave granted in the exercise of the court's discretion. State v. Deutsch, 34 N.J. 190, 197 (1961); R.R. 3:7-10(a). In exercising its discretion the court must weigh the policy considerations which favor the *77 finality of judicial procedures against those which dictate that no man be deprived of his liberty except upon conviction after a fair trial or after the entry of a plea of guilty under circumstances showing that it was made truthfully, voluntarily and understandingly. Deutsch, supra, at pp. 197-198; see also Note, 64 Yale L.J. 590 (1955).
The record of the trial clearly shows that the guilty plea entered by Herman, who was over 21 years of age, was made freely and understandingly with the assistance and advice of counsel. He executed Criminal Procedure Form No. 13A (see R.R. Appendix of Forms), witnessed by his lawyer, in which he stated that he understood the nature of the charge against him and knew that upon the entry of the plea the trial judge could impose any sentence which he considered appropriate, subject only to the limits prescribed by law. See R.R. 3:5-2(b). The execution of Form 13A weighs heavily against a contention that the plea was not entered voluntarily and understandingly. Deutsch, supra, at p. 201. Moreover, Herman was questioned extensively in open court where he stated that his guilty plea to robbery was made willingly with full knowledge of the consequences. See R.R. 3:5-2(a). He also specifically admitted being in the apartment of the complaining witness where the robbery allegedly occurred, being present when the complaining witness was struck and taking property from that apartment.
The record unmistakably illustrates the falsity of defendant's contention that he pleaded guilty because the prosecutor threatened to postpone the trial while he remained in jail under a high bail. When Herman entered his plea the trial had already commenced, the openings to the jury had been completed and the prosecutor was fully prepared to place his case before the court.[2] Defendant also contends that *78 when he was arrested he was held incommunicado by the police for six days, after which he signed a confession. However, a determination of the truth of this claim is not relevant to the resolution of this appeal. Defendant was represented by counsel prior to and at the time of his trial. If the State had attempted to produce any confession, defendant would have been fully able to challenge its legality both at the trial and on appeal. Thus, defendant's purportedly inadmissible confession cannot be a ground for withdrawing the guilty plea which he willingly and knowingly made with the assistance and advice of his attorney. See Shepherd v. United States, 191 F.2d 919 (8 Cir. 1951); Chadwick v. United States, 170 F.2d 986 (5 Cir. 1948); Note, 55 Colum. L. Rev. 366, 370-371 (1955).
Although the judge's discretion to vacate a guilty plea is liberally exercised when the defendant's motion, as here, is made before sentencing, in weighing such a motion the possibility of prejudice to the State must be considered. See State v. Deutsch, supra, at pp. 198, 201, 204. If a defendant represented by counsel were permitted to withdraw a guilty plea which he voluntarily and knowingly entered after his trial had started, as the defendant in this case is trying to do, the efficient and orderly administration of justice would be impeded. Criminal calendars would become increasingly congested and the State's efforts to effectively prosecute law-breakers would be seriously hampered by the delays. It is a difficult task at best for the State to assemble its witnesses and prepare its case for a trial on a specified date; it is neither *79 fair nor just to compel the State to repeat this procedure as to the same defendant when the first trial is terminated by the defendant's own guilty plea given freely and understandingly. See Everett v. United States, 119 U.S. App. D.C. 60, 336 F.2d 979, 984 (1964). Moreover, Herman has added to the situation the possibility of prejudice to the State by fleeing the jurisdiction and absenting himself for an extended period of time, and there is really no way to be sure that such prejudice did not actually ensue. Not only may the State now have difficulty in locating the necessary witnesses, but the witnesses' memories of the contested events may have faded with the passage of time. See Clark v. State, 57 N.J.L. 489, 490 (Sup. Ct. 1895), affirmed 58 N.J.L. 383 (E. & A. 1895); Hubble v. State, 41 Wyo. 275, 285 P. 153 (Sup. Ct. 1930).
As we have already stated, a motion to withdraw a guilty plea is addressed to the sound discretion of the trial court. However, in this case we think the trial court erroneously exercised its discretion in failing to consider that the defendant's trial had already commenced when he pleaded guilty and that the State's ability to conduct an effective prosecution was in all probability impaired by the defendant's flight from this State and by his remaining a fugitive for over half a year. An accused should not be permitted to play fast and loose with our courts.
Reversed.
For reversal Chief Justice WEINTRAUB and Justices JACOBS, FRANCIS, PROCTOR, HALL and SCHETTINO 6.
For affirmance None.
NOTES
[1] The indictment also named one William Beard as a defendant, but he has apparently never been apprehended.
[2] The genesis of defendant's claim is probably the following colloquy which took place after the trial judge had accepted his plea:
"THE COURT: All right. The sentence date will be July 10, 1963. Do I understand, correctly, that you are on bail?
THE DEFENDANT: Yes.
THE COURT: Unless there is some objection by the Prosecutor bail will be continued [at $1,000].
MR. MINTZ [the prosecutor]: No objection. I will tell the Court, frankly, that it would have been my intention, and I had no doubt of the outcome of the trial, to request the Court to raise his bail to $10,000.00 upon the tender of the verdict by the jury. In view of the fact that the defendant, by this plea, has done the first positive and affirmative act, which would indicate some contrition for what he has done, I would make no application to amend the bail and will be agreeable to it continuing."
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336 S.W.2d 473 (1960)
SUNSET ACRES MOTEL, INC., a Dissolved Corporation, Respondent,
v.
Sydney JACOBS and Sylvia Jacobs, Co-Partners d/b/a Sydney Jacobs Realtors, and William Goodman, Appellants.
No. 47190.
Supreme Court of Missouri, Division No. 2.
June 13, 1960.
Motion for Rehearing or for Transfer Denied July 11, 1960.
*475 Elmer Price, Milton I. Goldstein, St. Louis, for appellants.
Greensfelder, Hemker & Wiese, Forrest M. Hemker, Mark R. Gale, St. Louis, for respondent.
Appellants' Motion for Rehearing or for Transfer to Court En Banc Denied July 11, 1960.
EAGER, Judge.
This is a suit by a dissolved corporation (see § 351.565 RSMo 1949, V.A.M.S.) against the members of a real estate brokerage partnership and its employee for damages on account of fraudulent representations, concealment and breach of trust in connection with the sale of a motel. Plaintiff recovered $15,000 as actual damages; the jury allowed no punitive damages. Following the overruling of their motion for new trial, defendants appealed. We shall refer to the parties as plaintiff and defendants; and, since Frank Lama was the principal stockholder and chief representative of the plaintiff, we may at times refer to him as the plaintiff.
Mr. Lama had built this motel and operated it for three or four years; desiring to sell it, he employed the defendants Jacobs as his agents and gave them a ninety-day exclusive listing under date of June 23, 1955. The sale price was fixed at $300,000 with a 5% commission. This listing expired in September 1955 with no sale made, but Lama stated thereafter, in substance, that defendants might continue their efforts to make a sale. The salesman principally involved in this deal was William Goodman, one of the defendants. Except where a distinction is necessary, we shall occasionally refer to the defendants collectively as "Jacobs." In October 1955 Lama was advised by Jacobs that the Koch family was interested in purchasing the motel. This family consisted of Alphonse J. and Evelyn Koch, their son Vernon A. Koch and his wife June M. We shall merely refer to these persons as the Kochs, since they acted jointly in so far as we are concerned. The Kochs examined the motel and were definitely interested, but they were short on the financing. They owned a commercial property at Thrush and Lillian in St. Louis, consisting of a grocery store and two small shops, with living quarters above (which we shall refer to as the Thrush property) and a residence on Fontaine Avenue; they had $10,000 in cash. The equity in the Fontaine property was recognized to be $10,000. The value of the Thrush property was questionable. Goodman prepared a sales contract dated November 9, 1955, proposing to sell the motel to the Kochs for $300,000 by raising $150,000 on a first deed of trust, having plaintiff take back a second deed of trust for $80,000, deeding the Fontaine property to the seller at $10,000 and the Thrush property at $50,000, with the balance of $10,000 to be paid with the cash available. The Kochs signed that contract and made a $2,500 deposit with Goodman. At substantially the same time Goodman prepared a proposed form of contract (dependent on the closing of the principal sale) whereby Jacobs proposed to buy the Thrush property from plaintiff at an unstated amount. This was not signed by anyone. He also prepared a contract between the Kochs and Jacobs under date of November 10, 1955, which, upon the assumption that plaintiff would take the Thrush property at $50,000, provided that Jacobs agreed to repurchase it from plaintiff at an unspecified price, the Kochs agreed that if Jacobs resold the property for less than $40,000 net, they would pay him the difference between the proceeds of the sale and $40,000 (but not to exceed $15,000) in the form of a note secured by a third deed of trust on the motel property. The proposed note and deed of trust were particularly described. This agreement was executed by the Kochs only, but it remained in the possession of Jacobs. Goodman presented the $300,000 sales contract to Lama, along with the proposed *476 agreement to repurchase Thrush at an unspecified sum; apparently Goodman then suggested a repurchase at $22,500. He admittedly did not show Lama at any time the agreement signed by the Kochs, as last described. Lama had examined the Thrush property and said that he did not want it at any price and he told Goodman, in substance, to "work it out" himself, or to sell it themselves. The $300,000 contract was never given serious consideration by Lama because he did not want the Thrush property. Numerous conferences and negotiations followed. According to Mrs. Evelyn Koch, Goodman next suggested to them a purchase of the motel at $290,000 with the Thrush property valued at $40,000; then a purchase at $287,500 with Thrush valued at $37,500. In these negotiations Goodman eventually stated that since Lama did not want their Thrush property, Jacobs would guarantee them $22,500 for it and (according to Mrs. Koch) "We would owe them fifteen thousand dollars," with a credit for any overplus on resale. Goodman never discussed with the Kochs a purchase of the motel at $280,000, and when they first saw the $280,000 contract, that figure was lined out and $272,500 was substituted.
Goodman told Lama that $280,000 was the most that the Kochs would be interested in paying, and Lama then said that if he "came down" to that price he would certainly pay no more than $5,000 as a commission. In a further conference Goodman got Lama to agree to a commission of $7,500 on the $280,000 figure. A sales contract was prepared at $280,000, dated November 16, 1955; this contract was originally drawn by Lama's attorney. It provided that the seller agreed to pay $7,500 "as full commission upon the closing of this sale." Goodman then prepared a new form of contract (the one which was eventually signed) at $280,000, merely eliminating this quoted wording and leaving the matter of commission blank. About this time either Jacobs or Goodman called Lama and asked him if it would be satisfactory to show the sale price as $272,500 net; Lama called his attorney and then agreed provided the wording "no commission of any sort is due or payable by seller" was inserted in the contract. When Lama signed it these words were inserted. Prior to the meeting at which the contract was signed the typed sale price of "$280,000" had been changed in ink to $272,500; in that form it had previously been presented to the Kochs and the change initialed by them. Though dated November 16, 1955, the contract was signed on or about November 21st.
Under date of November 19, 1955, Jacobs had taken from the Kochs an agreement (somewhat similar to the one dated November 10th, and contingent upon the closing of the main deal) whereby: he agreed to buy the Thrush property from them at $22,500, and resell the same; if the resale was at less than $37,500 net, the $22,500 guaranteed price would be reduced accordingly; and the Kochs were to give Jacobs a note and third deed of trust on the motel property for $15,000 at 6% interest payable in monthly installments, to assure him a compensation of $15,000. Jacobs admitted that this agreement was procured at substantially the time when they were talking to Lama about the $272,500 net deal, but Goodman testified that it was actually executed after the sales contract, although prepared earlier. In connection with the negotiations of Goodman for the $15,000 note, Mrs. Evelyn Koch testified:
"Q. (By Mr. Hemker) Well, now, tell us what was said about that. You said that he told you first that it was two-hundred-and-eighty-seven-thousand-five-hundred, the price, didn't he? A. Yes.
"Q. Now, how did he explain to you that two-hundred-seventy-two-thousand dollar figure that is in the contract that you signed? A. Well, Mr. Goodman said two-hundred-and-seventy-two-thousand, plus the fifteen *477 thousand for commission, as he called it, would make two-hundred-eighty-seven-thousand-five-hundred dollars, which was the amount we paidtwo-hundred-eighty-seven-thousand-five-hundred dollars.
"Q. Did you have any other conversation with him about why he was having you pay the commission instead of Mr. Lama? A. Well, he said when the buyer pays the commission, whetherit's just added on. If the seller wants a certain price, a commission is added on and that's what the buyer has to pay.
"Q. Yes. Go ahead. A. So what was the difference, if he paidif we gave him the money and he paid, Mr. Lama, or if we owed Mr. Jacobs the money, which we thought was all right, too. It was two-seventy-two plus fifteen thousand dollars commission, made two-hundred-and-eighty-seven, which was the wholewhich was the price we paid."
Goodman testified that he told the Kochs that Lama was selling for $272,500 net, that "we had no commission," and that they would have to pay it.
It is conceded that Lama was never told of the contract between Jacobs and the Kochs, nor did he know of the $15,000 note and deed of trust; he learned of them some months after the closing. He did not inquire of the Kochs as to whether they were paying any commission, nor did Lama and the Kochs ever discuss the purchase price directly. Just prior to the closing, and on the same day, Jacobs had the Kochs execute the $15,000 note and deed of trust. He eventually sold the Thrush property at a figure which netted $4,627.49 in excess of the $22,500 guaranteed figure and gave them credit by cancelling the $15,000 note and deed of trust and taking new ones for the adjusted figure. These called for payments of $195.95 monthly, all of which (23 in number) had been made to the time of trial. Jacobs had arranged temporary financing on the Thrush property pending the closing of the motel sale, so that $22,500 from that source was used in the closing. It is apparent that the Kochs were easily persuaded because they were unable otherwise to raise the cash necessary for the purchase of the motel, even at the $280,000 figure used in dealing with Lama.
The sale was consummated on January 3, 1956 at the Title Company; the closing statement showed the purchase price at $272,500, with a notation "no commission from seller." The first mortgage financing was reduced from $150,000 to $145,000, and Lama increased the second from $80,000 to $85,000. He also took a chattel mortgage as additional security. By the proceeds of this financing, plus the Fontaine property at $10,000, $10,000 in cash from the Kochs, and the $22,500 raised on the Thrush property, the $272,500 net figure to Lama was thus arrived at.
Since the valuation of the $15,000 note given by the Kochs was an issue on the matter of damages, defendants produced a Mr. Seeman, President of a mortgage banking firm, as an expert witness. In answer to a hypothetical question, he stated that as of January 3, 1956, the value of the note and third deed of trust would be $6,750 to $7,200, plus "a calculated value of the contract" for the sale of the Thrush property. He was unable to give a value to that contract as of January 3, 1955; he had not considered the fact that the four Kochs had signed the note or their responsibility, nor the making of the subsequent payments, nor the income derived from the motel. He gave it as his opinion that the adjusted note for $10,372.51 was worth from $5,500 to $6,000 as of April 1, 1956. These figures were apparently based on assumed discounts to be applied to a third mortgage note.
We do not deem it necessary to digest the pleadings, for no point is made of any deficiency. The following facts become necessary because of the point made that a *478 mistrial should have been declared. Prior to the convening of court on the third morning (April 17, 1958) a woman juror was observed talking to Mrs. Lama in the hall. This was reported to the court by defendants' counsel. Upon interrogation of both the juror and Mrs. Lama by the court it was developed that the juror came over and struck up a casual conversation about the weather and the juror's little boy, and that the juror showed Mrs. Lama pictures of the boy. Nothing was discussed remotely bearing on the case. It was also reported to the court by defendants' counsel that on the same morning Mr. and Mrs. Lama were seen talking to juror Wise, while standing at an open window in the courtroom. All three were examined by the court about this. All testified, in substance, that Mr. Wise had stopped at the window, remarked on the weather, said he'd like to go fishing and that he had gone somewhere the evening before to look after some concrete job he was handling; also, that he had a cabin or some place where he usually went on weekends. The Lamas simply agreed about the weather and fishing. There was no discussion of the case whatever. Mr. Wise was further questioned by the court concerning any possible prejudice, cautioned that he must keep an open mind on the case and told not to discuss what had occurred with the other jurors. The extent of this examination may have impressed him. The court had regularly cautioned the jury at each adjournment about discussing the case. A motion for a mistrial based on these occurrences was overruled.
Shortly after the foregoing occurrences and while the court was in recess, Jacobs and Goodman went to the coffee counter in the court building. There they saw Mr. Wise and three or four other jurymen. They testified (differing slightly) that Wise called out to them: "Hey, can I talk to you about fishing? You wouldn't want to go fishing?" Jacobs stated that the remarks seemed to him to be sneering and hostile. Jacobs and Goodman said nothing and walked away. This occurrence was promptly reported to the court. Jacobs, Goodman, Wise and four other jurymen were interrogated by the court concerning this incident. Mr. Wise testified that he had merely stated again in answer to some question, that he would like to go fishing as soon as he could get away, and that he did not make the controverted statements to Jacobs and Goodman, but had only passed the time of day with them. The court again cautioned him and asked him if he could give both parties a fair trial and he stated that he intended to do so. When asked again if anything had occurred to "influence" him, he answered "No," that this was his first time on the jury and that he was trying to do what was right; at that point he added: "Well, I don't know if they're trying to push me, but they ain't going to get nowhere. I'll try to do what's right, what I think is right, and that's as far as it's going to go with me." The versions of the affair as related by the other jurors varied somewhat. One said that Wise directed the "fishing" remark to the defendants in a friendly manner; another stated that he said it loudly, but in a friendly manner; another heard no conversation between these people; and the last one heard a "fishing" remark but did not know to whom it was made. In all this questioning of the jurors, counsel were given an opportunity to participate. These jurors were carefully cautioned by the court and all stated that they could give both parties a fair trial. After extensive arguments this second motion for a mistrial was overruled.
We first consider the point that the court abused its discretion in overruling each and both of the motions for mistrial. It is not claimed that the case was even remotely discussed in these encounters with jurymen, nor that plaintiffs or their counsel were responsible for the occurrences. Defendants say, in effect: that these occurrences caused tension and confusion, and raised "subtle doubts" in the minds of the jurors; that it became clear that the defendants were the ones who had complained; *479 that prejudice and mistrust against the defendants resulted, and that the statements of nonprejudice by the jurors themselves are not a complete refutation; that it was evident that juror Wise was deeply affected and that the court also was deeply concerned over the last incident. Defendants rely here, principally, on Benjamin v. Metropolitan Street Ry. Co., 245 Mo. 598, 151 S.W. 91, 96, and Fitzpatrick v. St. Louis-San Francisco Ry. Co., Mo., 327 S.W.2d 801, though other cases are cited. It is true that the courts must seek to avoid not only those influences that "actually work evil," but also those that "have the appearance of evil." (Benjamin, Fitzpatrick.) It is also true that each party is entitled to a fair and impartial jury, in so far as the court may provide it. In Lee v. Baltimore Hotel Co., 345 Mo. 458, 136 S.W.2d 695, 127 A.L.R. 711, cited by defendants, one man had served by falsely impersonating another who was summoned for jury service. In Benjamin, supra, defendants' agents had associated with jurors, though presumably innocently, after the court had observed one such incident and had given specific instructions that no such further association be had. The trial court granted a new trial. The Fitzpatrick case involved a wholly different situation, with the court reaffirming the governing principles. And the court indicated there that if evidence of prejudice or nonprejudice was needed or desired, it could have been obtained by interrogation of the jury at the time. That was done here, fully. In Ullom v. Griffith, Mo.App., 263 S.W. 876, also cited, a juror had criticized counsel's examination of a witness who cried on the stand. These cases are not controlling here. It is true that the assertions of jurors as to their attitudes or prejudice are not conclusive on the court (Ullom, supra), and that the appellate courts are more liberal in sustaining an order granting a new trial than one refusing a new trial (Fitzpatrick, supra; Reich v. Thompson, 346 Mo. 577, 142 S.W.2d 486, 129 A.L.R. 795). But in the final analysis, every case rests upon its own particular facts and a large discretion is rightly vested in the trial judge who sits as an intimate observer of the whole chain of events. We may not loosely reverse his decision, though we may give the refusal of a new trial a harder look than the granting of one. In any event, we must find an abuse of discretion. We find none here. The principles generally controlling in such matters are also discussed in Kennedy v. Holladay, 105 Mo. 24, 16 S.W. 688; Boyle v. Bunting Hardware Co., Mo.App., 238 S.W. 155; Gardner v. Turk, 343 Mo. 899, 123 S.W.2d 158, and McGraw v. O'Neil, 123 Mo.App. 691, 101 S.W. 132. Parties and jurors should avoid all appearance of evil, and if any contact motivated by improper design appears, the jury should ordinarily be discharged or a new trial granted, regardless of the existence of actual prejudice. Accidental and casual contacts with jurors are of rather common occurrence and often unavoidable. If the contact has been wholly innocent, a mistrial should not ordinarily be granted unless it can reasonably be found that there was some improper influence upon the jury. Kennedy, supra. Where a juror, by some inquiry or voluntary statement has raised a question as to his impartiality, the question becomes essentially one of fact, and primarily this decision rests with the trial court. An instance somewhat similar to this (with respect to Mr. Wise's statements) is found in Kirkpatrick v. American Creosoting Co., 225 Mo.App. 774, 37 S.W.2d 996, where a juror's questions concerning a written statement of plaintiff taken by the defendant were claimed to show his prejudice; the discretion of the trial court in refusing to discharge the jury was upheld. In Riley v. St. Louis Public Service Co., Mo.App., 245 S.W.2d 666, a juror had talked with an expert witness about some phases of the case while leaving the courtroom. The court said, in part, loc. cit. 674: "The occurrence seems more than anything else to have been merely due to Shatrick's lack of appreciation of the restraint that was to be imposed upon him as a juror, and not to have been attributable to any improper motive on his part. * * * The *480 court obviously did not feel that the incident had in anywise affected the result; and in refusing to grant a new trial upon such ground there is nothing to indicate that the court's discretion was abused."
These incidents were unfortunate. Perhaps they were exaggerated by the scope of the investigation made and the initial questioning of Mr. Wise, but counsel apparently acquiesced in all this and desired it. The first two casual conversations of the Lamas were fully explained. The alleged statements of Wise to defendants and his attitude on the stand were painstakingly considered by the trial judge and matters of credibility were involved. The statements about fishing did not violate the instructions of the court to Wise that he should not discuss what had occurred in his interrogation. We may reasonably conclude that the trial court felt that Mr. Wise's remarks, on and off the stand, were due to an overly expansive personality. Obviously, the trial judge found that none of these matters had prejudiced the jury and we certainly may not rule, removed as we are from the scene, that he abused his discretion in so ruling. A finding here that prejudice affecting the verdict had ensued would rest largely in "conjecture and suspicion." Jacobs v. Danciger, 344 Mo. 1042, 130 S.W.2d 588, 595, certiorari denied Danciger v. Jacobs, 308 U.S. 607, 60 S. Ct. 144, 84 L. Ed. 507. We must deny this contention of error.
Defendants complain of sundry alleged defects in plaintiff's given Instruction No. 2. They have violated our Rule 83.05, V.A. M.R., by failing to set out this instruction and others complained of in the argument of their brief. Reluctantly, we shall consider the principal points made, but will feel at liberty to disregard some contentions which appear rather trivial. The brief contains sundry points and subpoints attacking Instruction No. 2. Cases are cited to the effect that a verdict-directing instruction must include all the essential elements of plaintiff's case. That may be conceded, and the cases need not be discussed. The instruction is lengthy, but we cannot discuss it intelligently without setting it out. It was as follows: "The Court instructs the jury that if you find and believe from the evidence that the plaintiff, Sunset Acres Motel, Inc., employed the defendants to act as plaintiff's agent to procure a purchaser for and negotiate the sale of plaintiff's property mentioned in the evidence as Sunset Acres Motel, and if you find that the defendants accepted and undertook such employment, then during the course of the employment defendants owed plaintiff the duty to keep plaintiff fully informed of all facts material to the transaction; to practice good faith and exercise the highest fidelity toward and promote the best interests of plaintiff and if you find that in the course of such employment the defendants came into contact with the persons, referred to in the evidence as the Koch family, who purchased said property, and if you find that in the course of their said employment the defendants learned that the Koch family was willing to pay the sum of $287,500.00 to purchase Sunset Acres Motel and that the defendants failed to disclose such fact to plaintiff and, instead, falsely represented to plaintiff that the most the Koch family would pay for Sunset Acres Motel was $280,000, and if you find that plaintiff relied on such representation of defendants, and if you find that relying on said representation plaintiff agreed to sell Sunset Acres Motel to the Koch family for $280,000.00 provided defendants would accept the sum of $7,500.00 for their commission and that defendants agreed with plaintiff so to do, and if you find that thereafter, in reliance on said representation and agreement, plaintiff agreed to and did sell Sunset Acres Motel to the Koch family for the net sum of $272,500.00 believing that the price being paid by the Kochs was $280,000.00 as represented by defendants and that the defendants were to receive the difference of $7,500.00 in full for their commission as agreed to by defendants and if you find that the plaintiff *481 was induced to enter into the contract of sale by the said false representation as to price and the said agreement respecting the commission of $7,500.00 as set out above, and if you find that the Koch family in addition to the $272,500.00 paid to plaintiff for the purchase of Sunset Acres Motel also paid defendants the additional sum of $15,000.00 in the form of a note secured by a third deed of trust on the Sunset Acres Motel and that the Koch family actually paid a total of $287,500.00 for Sunset Acres Motel, if you so find, and if you further find that the defendants concealed from and failed to disclose to plaintiff that defendants were receiving and did in fact receive said note and third deed of trust for $15,000.00 from the Koch family and that the Koch family was paying and did actually pay $287,500.00 for Sunset Acres Motel, and if you find that these were substantial and material facts concerning the transaction which defendants should have realized would likely affect the judgment of plaintiff and plaintiff's decision to sell Sunset Acres Motel upon the terms mentioned in evidence, then, if you so find all of the facts in this instruction set out, then you are instructed that you may find that such facts and conduct on the part of defendants constituted a violation of the duty defendants as agents owed to plaintiff as their principal, and if you do so find, and if you further find that plaintiff was damaged thereby, then your verdict shall be for the plaintiff and against the defendants."
Defendants attack the submitted hypothesis that the Kochs were "willing to pay the sum of $287,500," and that they did pay such total sum. This criticism seems to be based on the fact that the Kochs had only $250,000 available in total financing, aside from the Thrush property; that it was only by virtue of Jacobs' purchase of Thrush at $22,500, that a price of even $272,500 was raised; and, therefore, that there could have been no "bona fide" willingness or offer to pay $287,500. The fact remains that Goodman represented the total price to the Kochs as $287,500 and that they clearly understood that such was what they were paying. We have quoted Mrs. Koch's testimony. And, moreover, they did pay that figure at the closing, even though the $15,000 note and third deed of trust went to Jacobs and Goodman. The argument that the Kochs did not have $287,500 or $280,000 would be just as applicable to the $272,500 figure, for all were based on Jacobs' acceptance of the Thrush property at $22,500; the only difference was that the Kochs were required in the final deal to add an additional note and deed of trust for Jacobs, over and above the $272,500 figure. This deed of trust was an encumbrance on the motel property and this part of the payment constituted, so far as the Kochs were concerned, a payment just as bona fide as was the first mortgage note. Jacobs accepted the note and deed of trust as a bona fide payment, and at the time of trial he and Goodman had collected approximately $8,600 on it. The "risk" he supposedly took on his compensation is immaterial. There was sufficient evidence for this submission. Next, defendants complain that the instruction permitted the jury to find that $280,000 was the highest offer submitted to plaintiff by defendants, and that this was not true because an offer of $300,000 had initially been made. Everyone connected with the case understood that the $300,000 contract did not even receive serious consideration, because therein plaintiff was required to take the Thrush property at $50,000. It had passed out of the picture, as both plaintiff and defendants understood. The failure to refer to that contract could not have misled the jury, nor was its hypothesization essential. The real controversy concerned only the subsequent developments. It was an essential fact that defendants had represented to plaintiff that $280,000 was the most the Kochs would pay. There was ample evidence to sustain this submission, not only by Lama's testimony, but by admissions of the defendants.
What we have said largely disposes of the argument that the instruction *482 failed to distinguish between the offer that required plaintiff to take the Thrush property in trade and those which did not. That is immaterial, for the only offer proposing a trade passed out of the picture almost as soon as it was made. Jacobs then saw fit to substitute money which he raised (largely on a loan) in place of the Thrush property. The instruction put no "duty" upon him to buy; he assumed that himself. We fail to see how the instruction ignores the contract of sale; it merely asserts a misrepresentation based on that contract as a foundation for plaintiff's knowledge.
It is also claimed that the instruction "improperly assumed a limitation of $7,500.00 on defendants' commission." We do not so construe it. It does permit the jury to find that plaintiff agreed to sell for $280,000, "provided defendants would accept the sum of $7,500 for their commission and that defendants agreed with plaintiff so to do * * *"; also, to find that plaintiff believed that defendants were to receive the $7,500 in full for their commission. There was evidence to support this submission in the conversations between Lama and Goodman. If the jury chose to find that there was no such agreement or that plaintiff did not rely thereon, either because of the wording "no commission * * * payable by seller" in the $272,500 contract or otherwise, it was at liberty to do so. The jury could have found, as defendants really argue here, that no limitation on the total commission was imposed, but it did not choose to do so. We find further that there was no assumption in the instruction that the $15,000 note was worth its face value. Defendants say that the only evidence was that it was worth less. The "$15,000" figure in the instruction was used primarily by way of description of the note, but in any event the jury was required to find the amount which the Kochs actually paid. On such an argument it might equally be questioned whether the $85,000 second mortgage note received by plaintiff was worth $85,000 and whether this element was also assumed in the instruction. The instruction submitted fairly the essential elements of plaintiff's case and we do not find it erroneous.
Defendants also claim error in the giving of Instruction No. 3. Briefly, it advised the jury: that if its verdict was for plaintiff under Instruction No. 2, then defendants had forfeited all right to compensation and could retain nothing; and that it might assess actual damages at such sum as it might find to be the value of the $15,000 note when received by defendants. The argument of defendants is that, even on plaintiff's theory, the defendants got a $7,500 commission from plaintiff which he knew about (by reducing plaintiff's price from $280,000 to $272,500 net) and an additional $7,500 from the Kochs; that the hidden $7,500 might be held to belong to plaintiff and thus be regarded as actual damages, but not the entire value of the $15,000 note. They argue, therefore, that the forfeiture of the original, known $7,500 commission was a penalty, that plaintiff could not have actually been damaged by what he had knowingly paid, and that the instruction was thus erroneous in submitting the whole value of the $15,000 note as actual damages. Stated another way, defendants say that in such a case the actual damages may only be the secret or hidden compensation received, and that these could not exceed $7,500 here; this, because this hidden commission would, on plaintiff's theory, belong to it, whereas the $7,500 concededly paid to defendants could not belong to plaintiff. Thus, defendants say the jury was permitted to award actual damages in a sum which was excessive by $7,500, and which was, in effect, a combination of actual damages and a penalty.
Certainly all damages here must be classified as either actual or punitive. Defendants cite Utlaut v. Glick Real Estate Co., Mo., 246 S.W.2d 760. There an agent had himself been interested in a purchase, and he not only collected a commission but realized a profit on resale. The court held that *483 plaintiff made a submissible case on defendant's fraud in violating its fiduciary relation with plaintiff by conducting secret dealings through a straw party, by taking a position antagonistic to its principal, and by failing to disclose the true facts. The court also held that Instruction "A" offered by defendant on actual damages was properly refused because it excluded therefrom the known commission paid. The court said, loc. cit. 764: "If defendant was unfaithful to its trust as such agent and secretly made a profit for itself, as all the authorities show, it was not entitled to keep either the profit or the commission and what it did with the money was no defense to plaintiff's claim for its recovery. See Van Raalte v. Epstein, supra, 202 Mo. loc. cit. 196, 99 S.W. 1077. Plaintiff was entitled to have the jury so instructed." We must conclude that the court was there considering actual damages only, for the instruction referred only to actual damages, and evidence affecting punitive damages was discussed later. The case certainly does not indicate that the commission knowingly paid should be excluded from the actual damages. It rather indicates the contrary. Defendants also cite State ex rel. St. Joseph Belt Ry. Co. v. Shain, 341 Mo. 733, 108 S.W.2d 351, and Hussey v. Ellerman, Mo. App., 215 S.W.2d 38, as holding that actual damages are measured by the loss sustained by the plaintiff. Those cases have no analogy on their facts. They merely state the principle and differentiate between actual and punitive damages. Here the trial court was correct in saying that if defendants were found to have been unfaithful they forfeited all right to compensation. Utlaut, supra, and cases there cited; 8 Am.Jur. Brokers, § 142, p. 1067; 12 C.J.S. Brokers § 69, p. 158; King v. Pruitt, 365 Mo. 823, 288 S.W.2d 923. The loss of the commission paid by plaintiff is not a true penalty such as is comprehended within the scope of punitive damages. These are "inflicted by way of punishment for the doing of an act maliciously * * *" (State ex rel. St. Joseph Belt Ry. Co. v. Shain, supra [341 Mo. 733, 108 S.W.2d 356]). Commissions paid to unfaithful agents have been held recoverable without even a discussion of punitive damages. Van Raalte v. Epstein, 202 Mo. 173, 99 S.W. 1077; Northcutt v. Fine, Mo., 44 S.W.2d 125. The theory is, perhaps, that the commission was never rightfully paid under the circumstances, that the money still belongs to the seller, and that he has been damaged to the extent of the wrongful payment. The recovery of punitive damages is always optional with the jury, whereas the law is that the unfaithful agent must make restitution of all that he has received by his perfidy, including commissions (Utlaut, supra; Northcutt, supra; Van Raalte, supra). The so-called "forfeiture" here was simply a liquidated part of the actual damages. We find no error in Instruction No. 3.
Instruction No. 5 submitted the issue of punitive damages. Defendants say that it confounded the errors of Instructions No. 2 and No. 3 and that is misled and confused the jury. It permissibly hypothesized again the essential elements of plaintiff's case, along with those elements which would support an award of punitive damages. We have held that Instructions 2 and 3 were not erroneous. It was not error to hypothesize the same essential elements along with a submitted hypothesis that they demonstrated an intent to "cheat and defraud," done wilfully and maliciously. In no other way could the matter of punitive damages be submitted. Moreover, the jury awarded no punitive damages. It has been held that claimed error in a punitive damage instruction will not be considered where the jury awarded no punitive damages. Rodgers v. Schroeder, 220 Mo.App. 575, 287 S.W. 861, 864; Kretzer Realty Co. v. Thomas Cusack Co., 196 Mo.App. 596, 190 S.W. 1011, 1014; Brown v. Payne, Mo., 264 S.W.2d 341, 345. We prefer, however, to rule this point on the grounds first stated.
*484 It is also urged that the verdict for actual damages is excessive; that only one expert testified as to the value of the $15,000 note, and that he valued it as $6,750-$7,200, plus a "calculated" value of the agreement to apply any overplus resulting from the sale of the Thrush property; that this total, in any event, would not have exceeded $11,827.49, whereas the jury awarded plaintiff $15,000; and that the amount of the verdict indicated bias and prejudice. Plaintiff was in nowise bound by this expert testimony even though it was uncontradicted. The weight of such testimony is for the jury. Kimpton v. Spellman, 351 Mo. 674, 173 S.W.2d 886, 892; In re Proceedings to Open Sixth Street, 276 Mo. 158, 207 S.W. 503, 504; Proceedings for Condemnation of Private Property for Sixth St. Expressway v. National Engineering & Mfg. Co., Mo.App., 274 S.W.2d 490, 492. The jury awarded no punitive damages, and we see nothing in this verdict which demonstrates bias and prejudice. The cases cited by defendants merely reaffirm the right of the trial court to set aside a verdict where it is so excessive as to indicate bias and prejudice. Sofian v. Douglas, 324 Mo. 258, 23 S.W.2d 126; Bailey v. Interstate Airmotive Inc., 358 Mo. 1121, 219 S.W.2d 333, 8 A.L.R. 2d 710; Dye v. St. Louis-San Francisco Ry. Co., Mo., 234 S.W.2d 532. We do not find here that the size of this verdict, coupled with any circumstances of the trial, indicated bias and prejudice. The jury simply found the note to be worth its face value. It has been held that in the absence of other evidence the value of notes or other securities is their face value. Bowman v. Branson, 111 Mo. 343, 19 S.W. 634, 639; Moffit v. Hereford, 132 Mo. 513, 514, 34 S.W. 252, 254; Muck v. Hayden, 173 Mo.App. 27, 155 S.W. 889, 891; Henry v. North American Ry. Construction Co., 8 Cir., 158 F. 79. This rule undoubtedly has its limitations, but since the jury here could disregard the oral testimony of defendants' expert, then we think it might reasonably have found actual damages up to the face amount of the note. The expert testimony was rather vague in any event, since the witness had disregarded one or more elements material to such a valuation. Defendants simply failed here to convince the jury that the $15,000 note and deed of trust were worth less than their face value. We cannot hold the verdict to be excessive for that reason. The trial court, with a greater latitude than we have, did not so find.
The last point made is that the case should have been tried in equity. The theory of this argument is that it was necessary for plaintiff first to seek reformation of the sales contract by substituting a $280,000 sales price for the $272,500, and by imposing a limitation of $7,500 on the total amount of commission to be received. Defendants say that here the jury was permitted to reform the contract and then find defendants guilty of fraud. Certainly a reformation, when and if necessary, may be granted only in equity. We need not discuss defendants' cases to this effect. The contract here was between plaintiff and the Kochs; neither of those original parties is seeking any recovery from the other. The complaint is by plaintiff-seller against its own agents, who were not parties to the contract, but only indirect beneficiaries by way of commissions. Plaintiff has sued in tort for the breach of a relationship arising through contract. The written contract was merely evidence of the breach, along with sundry oral testimony; it was not the basis of plaintiff's action. Under these circumstances reformation was unnecessary. See, generally, Van Raalte v. Epstein, 202 Mo. 173, 99 S.W. 1077, 1082, for the jurisdiction of the law courts in actions against brokers for fraud. It also seems significant that in this law action defendants have raised no point as to the sufficiency of the evidence. If a tort was committed and the evidence was sufficient to establish it, the possible existence *485 of some other form of action would seem irrelevant.
We find no prejudicial error and the judgment is affirmed.
LEEDY, P. J., STORCKMAN, J., and BROADDUS, Special Judge, concur.
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336 S.W.2d 642 (1960)
Grover C. DAUGHERTY, Jr., Appellant,
v.
J. E. GARRETT et al., Appellees.
No. 13596.
Court of Civil Appeals of Texas, San Antonio.
May 11, 1960.
Rehearing Denied June 15, 1960.
*643 Robert H. Rice, San Antonio, for appellant.
William H. Bloch, Corpus Christi, for appellees.
POPE, Justice.
This appeal concerns Section 14 of Article 1995, Vernon's Ann.Tex.Stats. J. E. Garrett, R. J. Garrett and Mary Pearl Cable, joined by her husband, J. D. Cable, sued Grover C. Daugherty, Jr., in San Patricio County, to cancel what they alleged to be a spurious lis pendents notice filed by Daugherty in that County, and for damages. Daugherty filed a plea of privilege to be sued in Bexar County, his residence. The trial court denied the plea. It is agreed that the lands affected are in San Patricio County. In proving the venue facts under Section 14, we look to the plaintiffs' petition. Marshall v. Ballard, Tex.Civ.App., 314 S.W.2d 368; Klein v. Sibley, Tex.Civ.App., 203 S.W.2d 239.
Plaintiffs alleged that Daugherty filed a suit against J. E. Garrett in San Patricio County in which he prayed only for damages for an alleged breach of a contract to sell him the San Patricio land. Plaintiffs alleged that Daugherty did not sue for the land, and that the Daugherty suit did not involve the title to real estate. They alleged, however, that Daugherty filed a spurious lis pendens notice in San Patricio County, which falsely stated that the pending suit affected the title to plaintiffs' land. They alleged, in substance, that the lis pendents was spurious and was filed for the sole purpose of clouding plaintiffs' title.
Defendant, Daugherty, argues by way of admission that the title to the real estate was in no way involved by his action against plaintiffs, that it was only a suit for damages, and that one who examined the pleadings in his suit against plaintiffs would at once see that the title was not involved. In essence, Daugherty admits that his lis pendens was not effective. Daugherty urges that no one would believe the lis pendens notice, since such a notice merely requires one to make an examination of the pleadings in his suit, which would show that the Daugherty pleadings did not support the statements in his own lis pendens notice. This argument is made in reliance upon Hexter v. Pratt, Tex.Com.App., 10 S.W.2d 692, which was decided before Article 6643, Vernon's Ann. Tex.Civ.Stats., was amended in 1927. Before the amendment, a lis pendens notice was a memorandum which merely referred persons to the court records to determine whether there was in fact a suit pending concerning the real estate.
Article 6643 was amended to read as follows: "All such notices of pendency shall be notice to all the world of their contents and that the suit or suits mentioned therein are pending, * * *." According to this record, plaintiffs pleaded that Daugherty filed a lis pendens notice which stated that there was a suit pending which affected the title to their lands, although Daugherty's suit in fact does not affect the title. The fact that the lis pendens is spurious and falsely stated that it was grounded upon a suit is the thing *644 which plaintiffs urge gives them grounds for cancellation and for their suit to quiet title.
This is not a suit to remove a lis pendens notice during the pendency of a suit, it is a suit to remove a lis pendens notice which has no support by a pending suit. Under the present statute, a lis pendens notice is notice to the world of its contents. Plaintiffs allege that the lis pendens gives false notice of the true Daugherty claims, and, because it warns the world of a claim to the real estate which does not exist, it clouds their title.
In our opinion, the plaintiffs' pleadings assert an action to quiet title, the venue for which is where the land is located. Texan Development Co. v. Hodges, Tex.Civ.App., 237 S.W.2d 436. Accord, Thomson v. Locke, 66 Tex. 383, 1 S.W. 112, 114; Neely v. Neely, Tex.Civ. App., 52 S.W.2d 927; First Nat. Bank of McAllen v. Moore, Tex.Civ.App., 7 S.W.2d 145; Colquitt v. Roxana Petroleum Corporation, 5 Cir., 49 F.2d 1025; 34 Tex. Jur., Quieting Title, § 6; 51 C.J., Quieting Title, § 59; 74 C.J.S. Quieting Title § 14.
Daugherty relies upon Howard v. Davis, 6 Tex. 174, and argues that plaintiffs have no cause of action since Daugherty's pretentions to a suit for the land, expressed in his lis pendents, are unfounded. Howard v. Davis holds that a disclaimer by one who has clouded a title would defeat a cause of action to quiet title. The case is not in point, since there is, as yet, no disclaimer. In looking at plaintiffs' pleadings, we find that the lis pendens notice is still speaking to all the world and saying that Daugherty has a suit pending against plaintiffs which affects plaintiffs' title.
Because the pleadings claim that Daugherty has filed a false lis pendens which in fact affects the title to land, this is a suit to quiet title, which is governed by Sec. 14, Art. 1995. The judgment is affirmed.
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336 S.W.2d 649 (1960)
Eupha Louise ELLIOTT, Appellant,
v.
Kenneth WESCOAT, Respondent.
No. 47865.
Supreme Court of Missouri, Division No. 1.
June 13, 1960.
R. S. McFarland, Nevada, for appellant.
Robert E. Seiler, Joplin, for respondent, Seiler, Blanchard & Van Fleet, Joplin, of counsel.
*650 COIL, Commissioner.
Eupha Elliott sought $25,000 for personal injuries allegedly sustained when the automobile she was driving was struck by an automobile being operated by Kenneth Wescoat, at the intersection of Washington and Walnut in Nevada, Missouri. Wescoat counterclaimed for $257.15 for damage to his automobile. We shall refer to the parties as they were designated in the trial court. A jury found for defendant on plaintiff's claim and for plaintiff on defendant's counterclaim. Plaintiff has appealed from the judgment entered on the jury's adverse verdict.
Plaintiff's evidence tended to show that stop signs were located at all four corners of the intersection of north-south Washington and east-west Walnut. At about 6 p. m. on July 2, 1958, plaintiff drove an automobile south on Washington and stopped when its front end was even with a stop sign located about eight or nine feet north of the north edge of Walnut. She looked to her left and saw defendant's automobile approaching from the east (traveling west) on Walnut about 50 to 59 feet east of the east edge of Washington and slowing as though it would stop at the stop sign. Plaintiff then started forward not knowing whether defendant had stopped, and without again looking to her left or again seeing defendant's car until the instant before its front end struck the left side of her automobile when she had reached the approximate center of the intersection. She could have stopped within two or three feet as she drove into the intersection. Her car came to rest at the southeast corner facing east and the defendant's automobile stopped at the north curb of Walnut about "two or three parking spaces" west of the west edge of Washington. There was nothing which obstructed the view to plaintiff's left and there was no evidence of any distracting circumstance or other traffic, either vehicular or pedestrian, which had any bearing upon the actions of either plaintiff or defendant.
Defendant's evidence tended to show that his car and plaintiff's car stopped at the respective stop signs at the same time; that he looked twice and each time saw that plaintiff's car was stationary; that he started forward in his regular traffic lane and next saw plaintiff's car when it was a foot or two immediately in front of his car. Defendant said that the sun was "glaring" but that it was "not too bad."
Plaintiff contends the trial court erred in refusing one instruction and in giving two instructions. Inasmuch as we have determined that the trial court did not err in overruling plaintiff's new trial motion, we do not reach defendant's contention that plaintiff was guilty of contributory negligence as a matter of law.
Plaintiff's verdict-directing instruction hypothesized the facts of the occurrence supported by her evidence and directed a verdict on the theory that she had a right to assume that defendant would stop at the sign and yield the right of way unless she had or should have had reason to believe to the contrary and that defendant negligently failed to yield the right of way and thereby caused the collision.
Plaintiff's first complaint is that the trial court erred in refusing to give her offered instruction 3. That instruction was: "The Court instructs the jury, that if two vehicles reach an intersection at approximately the same time, then the vehicle approaching said intersection from the right shall have the right of way. And if the jury find and believe from the evidence that plaintiff's automobile was being driven south on North Washington Street and that defendant's automobile was being driven west on East Walnut Street and if you further find and believe from the evidence that said vehicles reached and stopped, if you find that both vehicles were required to stop at said intersection by City Ordinance, at the same time or approximately the same time, then plaintiff's automobile had the right of way."
*651 Plaintiff argues that the instruction correctly declared the law and that she was entitled to have the jury so instructed and that it was the only proffered instruction which covered that aspect of the law of "right of way." Assuming, contrary to defendant's contention, that the instruction correctly stated the applicable law, it is apparent that plaintiff was not entitled to recover on any theory based upon the law set forth in instruction 3. As we have noted, plaintiff testified unequivocally that after she had stopped and immediately prior to starting forward, she looked to her left and saw defendant approaching the stop sign at decreasing speed and that at that time he was 50 to 59 feet from the east edge of the intersection. Thus, in view of that positive testimony, plaintiff could not recover on the basic premise of instruction 3, that both parties had reached the intersection at approximately the same time. That is to say, plaintiff could not recover on a theory supported only by defendant's evidence which was directly contrary to her own testimony. Miller v. Riss & Co., Mo., 259 S.W.2d 366, 370 [2, 3]. And, as we have heretofore noted, defendant did not recover on his counterclaim and, consequently, plaintiff could not have been prejudiced in so far as defendant's cause of action was concerned by the failure of the court to have given instruction 3.
It is true that defendant submitted plaintiff's contributory negligence by instructions B and C (to be hereinafter set forth). Instruction B hypothesized that plaintiff and defendant started into the intersection at the same time or approximately the same time. Even though plaintiff's recovery theory was opposed to that hypothesis, still if the jury believed defendant's testimony that he and plaintiff reached the intersection at the same time and disbelieved plaintiff in that respect, it might be that under some circumstances, plaintiff would have been entitled to a proper explanatory instruction to the effect that in determining whether the failure of plaintiff to have seen defendant's automobile as it proceeded across the intersection was a failure on plaintiff's part to exercise the highest degree of care, the jury could consider the law pertaining to right of way as set forth in instruction 3. In the present case, however, in order to find plaintiff contributorily negligent under instruction B the jury had to find a fact, viz., that plaintiff and defendant entered the intersection at approximately the same time, which, as above noted, precluded plaintiff's recovery in any event. It appears, therefore, that plaintiff was not prejudiced in any respect by the refusal of instruction 3.
Plaintiff contends the trial court erred in giving defendant's instruction B. That instruction was: "The court instructs the jury that if you find from the evidence that the plaintiff and the defendant both started into the intersection at the same time or at approximately the same time, and if you further find from the evidence that neither one saw the other crossing the intersection until it was too late to avoid a collision and if you further find that such failure to see each other constituted failure to exercise the highest degree of care and directly contributed to cause the collision, then you are instructed that both plaintiff and defendant were negligent and that neither one is entitled to recover from the other, and your verdict will be against both parties and you will not allow any damages to either."
Plaintiff says the foregoing instruction was "prejudicially erroneous because it told the jury that plaintiff was guilty of contributory negligence if she started across the intersection at the same time and failed to see defendant's vehicle." The supporting argument is that inasmuch as plaintiff had observed defendant approaching the stop sign at a decreasing speed, she reasonably was entitled to assume that defendant would respect the stop sign and stop, and thus, as we understand, as a matter of law, plaintiff could not have been guilty of any contributing negligence. Defendant's evidence was that plaintiff and defendant stopped at the intersection at the same *652 time and apparently started into the intersection at the same time, but neither saw the other after they had started until an instant before the collision. Certainly, under that evidence, a jury reasonably could have found that each was contributorily negligent for having failed to see the other in time for each to have avoided the collision.
Plaintiff next contends that the court erred in giving this instruction C:
"The court instructs the jury that even though you find from the evidence that defendant was partially blinded by the sun, nevertheless if you also find from the evidence that plaintiff was guilty of contributory negligence as set forth below, plaintiff is not entitled to recover against defendant.
"Therefore, if you find from the evidence that plaintiff, after stopping for the intersection and then starting forward, failed to notice defendant's automobile proceeding across said intersection and on a collision course with plaintiff's automobile, until defendant's automobile was approximately two feet from plaintiff's automobile and that if plaintiff had been exercising the highest degree of care in operating her automobile she would have seen defendant's automobile starting into the intersection and would have seen that a collision was going to take place between the two automobiles unless she stopped her automobile and that by the exercise of the highest degree of care in stopping plaintiff could have avoided the collision, and if you further find that plaintiff was thereby negligent and that such negligence directly contributed to cause the collision, then you are instructed that plaintiff is guilty of contributory negligence and your verdict will be in favor of defendant on plaintiff's claim, and you are instructed this is true even though you further find that defendant was himself negligent in not seeing plaintiff."
Essentially, instruction C submits about the same proposition submitted by instruction B except that it does not require any finding with respect to whether defendant did or did not stop at the intersection. There was evidence that plaintiff could have stopped within two or three feet and that she traveled at least nine or ten feet after she started from a stopped position before she reached the path of defendant's automobile. Plaintiff's contention seems to be that instruction C was erroneous because there was no evidence that she could have avoided the collision by stopping, i. e., even if she had stopped she would have been in the path of defendant's vehicle. It is apparent, however, that the jury reasonably could have found that if plaintiff had looked to her left as she started forward she undoubtedly would have seen defendant's automobile in a position which should have indicated to her that only by stopping could she avoid a collision and that she could have then stopped short of the path of defendant's car.
We should make clear that we have considered instructions B and C only in the light of the specific attacks made upon them by plaintiff and, by setting them forth and finding that plaintiff's particular attacks are not well taken, we do not necessarily recommend them for future use.
Plaintiff's final contention is that the trial court erred in refusing to grant a new trial on the ground that the verdict was against the weight of the credible evidence. Ordinarily we do not weigh the evidence in jury-tried cases. The credibility of the witnesses and the weight of the evidence were for the jury and it was for the trial court to say whether the jury's verdict was against the weight of the evidence. Nichols v. Bresnahan, 357 Mo. 1126, 212 S.W.2d 570, 572 [1-2]. It is only when there is complete absence of probative facts to support a verdict that we interfere. Siegel v. Ellis, Mo., 288 S.W.2d 932, 934 [1, 2]. Plaintiff has made no effort to demonstrate that there was a complete absence of probative facts to support the jury's verdicts.
Defendant's motion to dismiss the appeal or to affirm the judgment for plaintiff's *653 failure to comply with specified subsections of Supreme Court Rule 1.08, 42 V.A.M.S. is overruled.
The judgment is affirmed.
HOLMAN and HOUSER, CC., concur.
PER CURIAM.
The foregoing opinion by COIL, C., is adopted as the opinion of the court.
All concur.
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242 Md. 245 (1966)
219 A.2d 67
LOWITT AND HARRY COHEN INSURANCE AGENCY, INC.
v.
PEARSALL CHEMICAL CORPORATION OF MARYLAND
[No. 156, September Term, 1965.]
Court of Appeals of Maryland.
Decided April 21, 1966.
The cause was argued before PRESCOTT, C.J., and HORNEY, MARBURY, OPPENHEIMER and BARNES, JJ.
Benjamin Lipsitz, with whom was Philip O. Roach on the brief, for Harry Cohen Insurance Agency, Inc., appellant; no brief filed for Monroe H. Lowitt, other appellant.
W. Hamilton Whiteford, with whom were Louis G. Close, Jr. and Samuel J. Friedman on the brief, for appellee.
PRESCOTT, C.J., delivered the opinion of the Court.
After judgments were entered against appellant, Harry Cohen Insurance Agency, Inc. (Cohen, also sometimes referred to as the appellant), on the ground that it had failed in fulfilling its duty owed to appellee as appellee's insurance broker, and the appellant Lowitt, as sub-broker, on the basis of wilful misrepresentation and fraudulent misconduct, they separately appealed.
Appellant Cohen makes two contentions: (1) it claims that the evidence was insufficient to sustain the judgment entered *248 against it; and (2) that the insurance policy involved, even had it been effective, would not have afforded the coverage claimed.
Harry Cohen, the president of Cohen, had been an insurance broker and an agent for insurance companies for a number of years. (It is noted at the outset that appellee makes no charge against Cohen of fraudulent misrepresentation or misconduct on its part, but specifically bases its (appellee's) claim against Cohen on the ground of negligence.) Appellee and its predecessors engaged in the business of manufacturing chemicals, and, for some years, appellee's insurance requirements had been handled by Cohen, in which it placed confidence and upon whom it relied for advice and guidance in matters pertaining to insurance. In 1959, appellee's public liability policy was about to expire. Cohen advised it that this policy could only be placed in a foreign company at a higher premium rate or surcharge, to which it agreed.
Thereafter, Chemical received a certificate which is extensively referred to in the testimony as a "cover note." A cover note is a document commonly used when insurance is placed with foreign companies and contains representations that the broker "has procured insurance" as therein specified from the insurers named therein. It is for all practical purposes a "binder" or certificate representing that insurance has been procured and that a policy by the insurer will follow at a later date. K.C. v. Eureka, 185 P.2d 832 (Cal.). In the cover note involved in this case which Cohen delivered to Chemical in fulfillment of its agreement to procure a public liability policy, it was certified that insurance had been "procured * * * as herein specified from UNDERWRITERS at LONDON, ENGLAND, SUBJECT HOWEVER, in all respects to the terms, conditions and provisions of Underwriters at London policy heretofore or hereafter issued by the said Underwriters * * *" to which was affixed policy provisions usually found in insurance policies, and which bore the label of Cohen. The cover note was signed by General and Excess Underwriters, Inc. (General), another insurance broker from whom Cohen had obtained it.
In the upper right hand corner of the first page of the cover *249 note appeared a rubber stamp naming four insurance companies and opposite each company a percentage figure was set out, but no language was used obligating any of these insurers under the terms of the policy nor was Cohen able to explain the absence of such obligations, except to state that it was a requirement of the Maryland Insurance Department. However, this was denied by Mr. Melgard an official of that department. Chemical "felt confident" that this document was in fact an insurance policy which was issued by Lloyd's of London, covering the risks against which Cohen contracted to insure Chemical. Subsequent evidence disclosed that neither Lloyd's nor any of the insurers named in the rubber stamp had authorized the issuance of the policy on their behalf, except possibly Dorchester Insurance Co., Ltd., a company of questionable financial worth of which Lowitt was president and in which he and General had financial interests. Dorchester's financial difficulties shortly after the issuance of this cover note resulted in its liquidation in Jamaica. Cohen testified that he knew Lowitt "was one of the owners of it [Dorchester]."
While this cover note or policy was in force, Chemical engaged the services of Burns Detective Agency to trace and investigate a mysterious loss of raw materials from its plant. Burns assigned one of its men, a certain Coleman, to conduct the investigation. While so employed by Burns as a detective on the insured's premises, Coleman struck his head on an exposed valve stem, on September 12, 1960, but he continued to work for several days thereafter, and off and on for about three or four weeks after the incident. Coleman's work schedule was of an irregular nature and sometime later he "stopped work" for reasons which were never given to Chemical. On November 28, 1960, Burns assigned a new man to Chemical's plant, and according to witnesses produced by the appellants, no notice was ever given to Chemical of any claim by Coleman, or by anyone on his behalf, against Chemical.
Sometime in May or June of 1962, a third party action under the Workmen's Compensation Act was filed by Coleman, his employer and insurer against Chemical to recover substantial damages resulting from the injury, it being alleged therein that Coleman had been permanently disabled from a mental disturbance *250 attributed to the head injury, and the insurer had settled the compensation claim for a sum in excess of $20,000, for which it sought subrogation. On the day on which service of the narr and writ was made by the sheriff on Chemical's resident agent in Maryland, Samuel J. Friedman, who was also its attorney, the latter, at the request of Chemical communicated with Cohen to confirm the insurance coverage and arrange for the delivery of the suit papers to the insurers for defense of the action. Cohen informed Freidman that Chemical was insured by Lloyd's of London against accidents of this nature and to forward all the papers to him in order that he could send them to the proper parties for the defense of the suit.
On June 22, 1962, the same day on which the papers were served on Friedman by the sheriff, he sent the writ and narr to Cohen with a covering letter confirming Cohen's statement that Chemical was insured by Lloyd's of London. On June 27, Cohen wrote to Friedman returning the suit papers with a letter from General to Cohen stating that the policy had been placed with Dorchester, which was being liquidated and since the damages claimed were in excess of the limits of the cover note, Chemical would have to participate in the defense of the action "to a larger degree than the insurer." Friedman communicated with General upon receipt of the letter and was informed that only Dorchester remained liable since the other three companies had cancelled the policy, but "due to an error on our (General's) part" notice of cancellation "was not sent out." Friedman then informed Cohen, General and Lowitt that, in his opinion, the failure of the companies to notify Chemical of the cancellation did not relieve them of responsibility under the policy. As a result of these discussions, Cohen informed Friedman that all the insurers would "assume liability under the terms of this policy."
Accordingly, the narr and writ were again sent to General by Friedman by his letter dated June 28, confirming this latest understanding, a copy of which letter was sent to Cohen. Thereafter, General called Friedman and advised him that all the insurers, except Dorchester, had recanted and refused to defend the action and accept any liability under the policy by reasons of the cancellation. Because of its error in failing to notify *251 Chemical, General offered to contribute towards any settlement of the Coleman suit and sent Friedman a check for $250 on account for counsel fees for the defense of the suit.
In view of these developments, Friedman began an investigation of the entire situation surrounding the issuance of the policy, as a result of which it was ascertained: (1) that there was no such entity as "Underwriters at London, England"; (2) that Dorchester was not an English company, but a Jamaican one; (3) that Lowitt was president of and a stockholder in both General and Dorchester; (4) that General never had authority to issue the cover note involved in this case; and (5) that the officers and stockholders of both General and Dorchester were the same persons.
Upon learning these facts, Chemical filed a complaint with the Insurance Commissioner of Maryland, who informed them that other complaints had been filed against General and that joint hearings would be held in the near future. At these hearings, Lowitt freely admitted that the use of the rubber stamp naming the four insurance companies was a "subterfuge." He also admitted that "at no time did it (General) have authority to issue certificates * * *" such as were issued in this case and that it had "no authority from any London company" to bind them. (Emphasis ours.) Lowitt further testified that the usual practice of brokers in issuing cover notes was to "submit details of the risk to our London broker and he comes back and says we have placed this risk with such and such companies and we would issue our cover note accordingly." However, General did not have such confirmation before it issued the cover note in this case to Chemical in which it was stated that the risk had been placed. The practice of confirming the risk before issuing the cover note was also testified to by Mr. Salladin, appellant's own witness. As to this relation with foreign companies, Lowitt admitted that "We never had binding authority we were not permitted to have. We were not their agent, only brokers." The purpose of these hearings was to consider the revocation of the brokers' licenses of General and Lowitt, and as a result of the hearings both licenses were permanently revoked.
Friedman kept Cohen fully informed of all developments and conversations with General and Lowitt. Mr. Cohen visited *252 Friedman on one or two occasions, and, during one visit, he made the following revealing remarks: "Mr. Friedman, you taught me something about insurance that I never knew before." "These cover notes that I have been using for some time, I thought I was getting insurance from Lloyd's of London. It turned out, it wasn't Lloyd's of London at all."
The evidence further discloses that Cohen on at least five occasions issued cover notes similar to the one involved herein, and when it reported the tax required to be paid on policies issued by unauthorized companies, it named Lloyd's of London as the insurer, when, in fact, Lloyd's was not the insurer. In six instances, when Cohen billed appellee for premiums due, the insurer was named as Lloyd's of London although the insurer named in the cover notes was "Underwriters at London, England."
Harry Cohen, president of appellant Cohen, cannot be said to have been a very impressive witness. At one point in his testimony in an effort to show that Cohen had fulfilled its duty to the appellee by checking the type and financial stability of the companies in which it had placed appellee's insurance, he stated that he had checked them in Best's Insurance Guide and "several other publications." However, when given a copy of Best's he was unable to show any of the companies named in the cover note listed therein, and he could not remember any of the "other publications." And, although he offered to "get them," none was ever produced during a trial which lasted several days. In addition, when it was called to his attention that under Maryland law an insurance company which is not authorized to do business in Maryland cannot have an agent in Maryland for the issuance of a policy in Maryland, he stated the subject policy was signed by John Winslow "in Philadelphia." "I think [he] was a resident of the State of Pennsylvania." "I said I think. In New Jersey, wherever he may have been a resident."
Appellants produced a witness whom they qualified as an experienced broker in surplus lines of insurance. However, when he reached the heart of our present inquiry on cross-examination, he stated that he would issue a cover note only upon receipt of a cable indicating that insurance had been placed, and *253 not before, as was done in the case at bar. In addition, he testified, "Sir, we [his company] would not issue a document saying `Underwriters of London, England,'" explaining that his documents showed his company's capacity as a broker to procure insurance from a certain company or companies, whose participation "by percentage or by dollars amount" is shown, subject to the terms and conditions of a policy "heretofore or hereafter issued," or "wording somewhat similar to that."
I
Appellant Cohen's first contention is two pronged, and we shall consider them in the reverse order in which they are presented by it.
(a)
It claims the evidence is insufficient to establish that General and/or Lowitt were agents of Cohen in connection with the procurement of the cover note, so as to charge Cohen with responsibility for their activities. The question, we think, presents no serious problem. General was an insurance broker and it was necessarily Cohen's agent, when Cohen obtained the cover note from it, without authority from Chemical to do so. Chemical employed the services of Cohen, and placed confidence and trust in it as an experienced and knowledgeable insurance broker. Cohen violated this trust and confidence, when it, without permission, employed a sub-agent (or a sub-broker). Groscup v. Downey, 105 Md. 273; Van Lill Co. v. Packing Company, 155 Md. 303. And this is the general rule elsewhere. 1 Mechem, Agency (2 ed.), §§ 305, 306, 307; 12 C.J.S., Brokers, § 22. And a broker, which employs, without authority, a sub-broker, is responsible to the broker's principal for the defaults of the sub-broker. 3 Am.Jur.2d, Agency, § 157; 12 C.J.S., Brokers, § 23; Restatement, Agency (2d), § 406; 61 A.L.R. 279; Cf. Travlos v. Commercial Union of America, 217 N.Y.S. 459; Walker etc. v. Black, 65 A. 799 (Pa.); Harris v. A.P. Nichols Inv. Co., 25 S.W.2d 484 (Mo.). The trial court was amply justified in finding that General was the agent of Cohen, and it was liable for General's defaults.
(b)
Here, Cohen contends that the "evidence is not sufficient to *254 establish the standard of care reasonably to be expected from Cohen * * *." Its main argument seems to be that the degree of skill and diligence required of Cohen could only be established by expert testimony as to the degree of skill and diligence usually employed by brokers under circumstances similar to those surrounding the relationship between Cohen and Chemical, citing malpractice cases against physicians. We do not agree.
We shall accept the degree of care and skill suggested by Cohen in its brief, wherein it cites Couch, Insurance 2d, § 25:37, as follows:
"An agent, employed to effect insurance, must exercise such reasonable skill and ordinary diligence as may fairly be expected from a person in his profession or situation, in doing what is necessary to effect a policy, in seeing that it effectually covers the property to be insured, in selecting the insurer and so on."
However, we add thereto, the same author's section 481 of Couch, Insurance, wherein he states:
"As a general rule, a broker or agent who, with a view to compensation for his services undertakes to procure insurance on the property of another, but fails to do so with reasonable diligence, and in the exercise of due care, or procures a void or defective policy * * * is personally liable to his principal for any damages resulting therefrom. In fact, a broker taking money to secure insurance, who unjustifiably fails to secure the same, or to make an effort to do so, becomes liable, in case of loss, to pay as much of the same as would have been covered by the policy had it been secured."
Judge Watkins stated the rule thus:
"An insurance agent who undertakes to secure a specified coverage is liable in damages to the applicant for failure to procure such insurance, and this liability extends to negligence as a result of which the *255 specified risk is not included in the policy." Hampton Roads v. Boston Ins. Co., 150 F. Supp. 338 (D.C. Md.).
One final quotation from Appleman, Insurance Law & Practice, § 8833:
"Where insurance agents undertake to procure policies for individuals, they are bound to ascertain the responsibility of the company's issuing the policies, and to exercise reasonable diligence, and to make inquiries as to the companies whose policies they propose to deliver."
See also 22 Md. L. Rev. 82; Mechem, Agency (2d ed.), § 2370; 29 Am. Jur., Insurance, 163.
The evidence discloses so many violations of its duties by Cohen that it would require considerable space to name them all. First, it is uncontroverted that Cohen undertook and purported, for a consideration, to obtain for Chemical an effective public liability policy, and it failed to produce any policy whatsoever. On the contrary, all it produced was a spurious cover note from a sub-broker (without authority from its principal), a portion of which was freely acknowledged to be a "subterfuge." Under the ruling in Hampton Roads, supra, and the other authorities cited above, this would be all that was necessary to establish liability on the part of Cohen.
However, in addition to this, Cohen represented (to Chemical, the Maryland Department of Insurance, and Freidman) that the cover note which it delivered under its own label to Chemical was issued by "Lloyd's of London." It does not require an expert in the insurance field to see, even by a most casual examination, that Lloyd's of London was not a party to this instrument. We shall not repeat the difficulty experienced by Cohen's president, when he was requested to verify his alleged investigation of the financial stability of the insurers named in the cover note.
Moreover, Cohen obviously did not understand the significance of the "rubber stamp" on the cover note, as its president was unable to designate any language therein obligating in any manner the four insurance companies named, or any one of *256 them, and the signature on the cover note of General (which was well known to Cohen as a local broker) purporting to bind foreign, unauthorized insurance companies should have alerted any skillful insurance man as to the questionable validity thereof. The language used in the cover note represented that insurance had been "procured * * * from Underwriters at London, England, Subject, however, * * * to the terms, conditions and provisions of Underwriters at London policy * * * issued by said Underwriters * * *." (Emphasis ours.) It is conceded that there is no such entity or insurance company in existence known as "Underwriters at London, England." It seems apparent that any insurance broker, by the exercise of the most meager care, could and should have ascertained that fact.
And Cohen should have known that a cover note, even when properly and authoritatively issued, is merely a binder or certificate representing that insurance had been procured and a policy, properly executed by the insurer, would follow at a later date, K.C. v. Eureka, supra; yet, it failed to see that any such policy was ever issued or delivered to Chemical.
The above constitute some of the specific acts of carelessness and lack of due diligence and care on the part of Cohen, and they are compounded by the fraud of Cohen's agents. We hold that Judge Sodaro committed no error in finding Cohen responsible.
II
Cohen claims there are three defenses (which we consider below under [a], [b], and [c]) available to it even if a valid policy had been issued according to the terms of the cover note. In considering these contentions, we shall make two assumptions: we shall assume, without deciding, that any valid defense which could be offered by the insurer had the policy been issued is likewise an effective defense insofar as Cohen is concerned; and that Cohen is bound by the terms of the cover note to the extent that such an insurer would have been. Its position that it may raise "policy" defenses is tantamount to an admission that the terms and conditions of the "policy" are binding upon it, for the purposes of considering these contentions.
*257 (a)
The cover note, or "policy," contains the following provision under the heading "Definitions of Hazards."
"INDEPENDENT CONTRACTORS"
"Operations performed for the named insured by independent contractors and general supervision thereof by the named insured, if the accident occurs in the course of such operations, other than * * *."
Since no premium for this coverage was paid by the appellee, Cohen argues that Coleman, being an employee of an independent contractor, appellee is not covered under the terms of the "policy." However, it paid premiums for Coverage A, which obligates the insurer to "pay as damages because of bodily injury * * * sustained by any person, caused by accident and arising out of the hazards hereinafter defined." Under the heading of "Definition of Hazards" for which appellee paid premiums and was covered, there appears the following: "1. Premises-Operations. The ownership, maintenance or use of the premises, and all operations during the policy period, which are necessary or incidental thereto." (Emphasis added.)
These two provisions are frequently found in public liability policies and have been construed on a number of occasions.
In the case before this Court, the injury sustained by Coleman resulted when he struck his head on an exposed valve having a sharp point, from which the handle or wheel had been removed and had not been replaced by the appellee, or its agent. If there were any negligence which caused the accident, it was directly attributable to appellee in the "maintenance or use" of its plant and "premises," one of the coverages of the policy. The duties of Burns and Coleman did not require them to maintain the plant or premises. The above provisions, or ones very similar thereto, have been construed by courts of high authority contrary to appellant's theory. In Chrysler Motors v. Royal Indemnity Co., 174 P.2d 318 (Cal.), the Court said: "The exclusion is not of persons working for an independent contractor but for liability arising out of work let or sublet to such contractor." See to like effect Gulf Portland Cement Co. v. Globe Indemnity Co., 149 F.2d 196 (C.A. 5). 7A. *258 Appleman, Insurance Law & Practice, § 4493.3, states the proposition thus: "An injury to an employee of a sub-contractor is covered where a liability policy covered all operations necessary or incidental to the insured's business." (Emphasis added.) In holding that this contention lacks merit, we note the appellant cited no authority whatever in support of its position.
(b)
The "policy" provides that it does not apply:
"1. To injury to any person who at the time of sustaining such injury is engaged in the service of and/or acting on behalf of the insured." (Emphasis added.)
The appellant argues that even if Coleman were acting as an independent contractor and not encompassed within the terms "in the service of" the appellee, he was "acting on behalf" of it, and therefore was excluded. Counsel for appellant acknowledge that they could find no case construing these words "in the exact context of the policy exclusion in issue, or in the special circumstances of the instant case"; appellee cites none, and our research has failed to produce any.
The question is not entirely free from difficulty. However, Coleman was admittedly an employee of an independent contractor. There was no master-servant relationship between the appellee and Coleman. Workmen's Compensation was paid by Burns to Coleman and a third-party action was filed against the appellee which precipitated the present suit. Appellant's contention here seems to be inconsistent with its admission in its brief in which it concedes that the settlement with Coleman of the third-party action was fair and reasonable. This concessum tends to negate the theory that Coleman was acting on behalf of the appellee or that he was in its service.
It has been held that "the primary purpose of the words `in the service of another' is to require the relation of master and servant and to exclude independent contractors [emphasis ours]." Warren's case, 97 N.E.2d 184 (Mass.), and we think the supplemental phrase "on behalf of" was intended to broaden very little, if at all, the reach of the phrase "in the service of another." To broaden its scope to the extent urged by appellant would go a long way toward emasculating the protection *259 of a public liability policy; because, except possibly for trespassers, most persons lawfully upon the premises of another could be said (by applying a literal definition of the terms) to be doing something "on behalf of" an insured. Recognizing and applying the oft repeated principle that an ambiguity in an insurance policy prepared by the insurer should be construed in favor of an insured, we hold that Coleman did not come within the purview of the exclusionary provision here under consideration.
(c)
At this point, the appellant argues that the appellee failed to "comply with the notice requirements of the policy"; hence it is relieved of any responsibility for injuries resulting from the accident. Appellee counters by stating that no "notice of Coleman's injury [was] required to be given because of the slight nature of the injury," and that, in any event, appellant waived the notice requirements. As appellee's first contention is, we think, sound, we shall not discuss the second.
The "policy" provision follows:
"The following conditions are deemed conditions precedent to the liability of Underwriters:
* * *
"4. NOTICE OF ACCIDENT
When an accident occurs, written notice shall be given by or on behalf of the insured to Underwriters and/or their duly authorized representatives as soon as practicable."
The general rule is that a provision in an insurance policy requiring notice by the insured to the insurer as soon as practicable, when it is made a condition precedent, must be complied with in order to obligate the insurer. Watson v. U.S.F. & G. Co., 231 Md. 266. Apart from the fact that "Underwriters" was non-existent and not an entity with "duly authorized representatives," we think this aspect of the present appeal is controlled by the holding in Lennon v. American Farmers Mutual Ins. Co., 208 Md. 424.
In that case it was held that where there is apparently no injury from an accident and no reasonable ground for believing *260 that an injury might ensue therefrom, the insured had no obligation to notify the insurer, even though serious injury developed therefrom, until a reasonable time after he became aware, in the exercise of ordinary care, of the serious aspects of the injury suggestive of a possible claim for damages under the policy. In the instant case, the injury to Coleman was slight; his head was "bleeding a little"; he did not want to go to appellee's doctor; he worked "off and on" for 3 or 4 weeks after the accident; and appellee's plant manager was never told why Coleman stopped work. The above facts did not indicate that a serious mental condition would result from the incident. It appears that Coleman's claim, which was settled, was based principally upon a psychiatric condition, which developed later, although he, of course, claimed that it resulted from the slight cut on his head. The appellee had no notice of any claim against it by Coleman until its resident agent received the "suit papers." Both Cohen and Lowitt were promptly notified. We hold that Chemical complied with the notice provision of the "policy."
We stated earlier in the opinion that Cohen and Lowitt separately appealed. They did, but Lowitt filed no brief and presented no argument, submitting his appeal on Cohen's brief. Cohen's brief was prepared by its counsel, who submitted contentions and arguments in its behalf. We find nothing in Cohen's brief that would be beneficial to Lowitt; we will, therefore, dismiss this appeal.
Appeal of Lowitt dismissed; judgment against Cohen affirmed; appellants to pay the costs.
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336 S.W.2d 118 (1960)
W. L. McCRORY, Plaintiff-Appellant,
v.
Paul MONROE and C. O. Holmes, Defendants-Respondents.
W. L. McCRORY, Plaintiff-Respondent,
v.
Paul MONROE, Defendant-Appellant, and C. O. Holmes, Defendant-Respondent.
Nos. 7818, 7819.
Springfield Court of Appeals. Missouri.
May 23, 1960.
*119 Byron Kearby and Edward E. Calvin, Poplar Bluff, for appellant W. L. McCrory.
Henson & Henson, Poplar Bluff, for respondents Paul Monroe and C. O. Holmes.
McDOWELL, Judge.
Plaintiff, W. L. McCrory, brought this action in replevin against defendants, Paul Monroe and C. O. Holmes, to recover possession of cattle. The cause was tried by the court, jury having been waived, and judgment rendered for plaintiff on the petition and on count one of the cross-claim and for defendants on count two of the cross-claim in the sum of $500.50, damages to growing crops.
The replevin petition was in regular form. The joint answer of defendants was a general denial and counterclaim in two counts.
Count I was for damages sustained by defendant, Monroe, for one-half mile of woven wire fence alleged to have been torn down and removed by plaintiff.
Count II was for $1,500 damages to growing crops alleged to have been sustained by defendants, jointly, from negligence of plaintiff in allowing his cattle to enter defendants' land injuring and destroying their growing crops.
The reply was a general denial.
Plaintiff appealed from a judgment in favor of defendants on count II, (case No. 7818), and, defendant, Monroe, appealed from the judgment in favor of plaintiff on *120 count I, (case No. 7819). These appeals are consolidated for opinion of this court.
Plaintiff and defendant, Monroe, are adjoining landowners in Butler County, Missouri. Their lands are separated by a mile long partition fence running east and west. It was built in 1950 by a former owner of the Monroe tract. The owners, after suit, agreed that plaintiff build and maintain the east one-half of the fence and that defendant, Monroe, take the west half. The fence was made of woven wire with one bark wire at the top. Just prior to defendant's moving on the farm, plaintiff removed the wire from the posts, which had rotted off, laid it on the ground, and made new posts and distributed them along the fence line in preparation for rebuilding.
The evidence is that there was a question as to the dividing line between the farms and it was agreed that the county surveyor survey the line before rebuilding the fence. Defendant says that the fence has been down two years and nothing has been done by plaintiff. He admits it was satisfactory with him for plaintiff to build the east half of the fence and to have the dividing line surveyed. He stated that plaintiff was to see the surveyor but had not done so. We think the evidence shows that the east half of the dividing fence was on the ground; that the posts had rotted off, and that all plaintiff did was to take the posts off the wire and lay the wire out on the line.
C. O. Holmes testified that on May 1st plaintiff's cattle got on 15 acres of their wheat, which was in full bloom, and ate and destroyed about 1½ acres; that the wheat threshed made about 30 bushels per acre and that at the time was selling at $1.90 per bushel.
He testified that the same cattle were on defendants' land June 26, 1957; that he counted 30 head. He gave this answer: "Yes, sir, they was in our rye and vetch and in our rye and on ten acres of beans and on five acres of wheat. We lacked five acres of getting our wheat threshed." He testified the wheat would have made 30 bushels per acre; that the cattle just "tromped around through it." He testified that he threshed it and got 100 bushels; that about 50 bushels were destroyed.
He said the cattle were on 10 acres of rye and vetch; that it would have made 1,000 pounds per acre; that the cattle "was around tromping around over all of it". That it was bringing .08 cents per pound.
He said the cattle got on 25 acres of rye which would have yielded 20 bushels per acre; that the market price was .90 cents per bushel; that after the cattle were on it he was unable to harvest any of it.
He said they had 10 acres of growing beans, which the cattle ate and ruined, and they had to be planted over; that the beans would have made 30 bushels per acre and at the time he threshed them the market price was $2.05 per bushel.
Witness testified that about 30 head of plaintiff's cattle got in their crops June 30th; that while he was notifying plaintiff the rest of the cattle came back in the field; and they put 17 head in the lot; 14 head were put up June 30th and three more June 26th; that these were the cattle replevied. He stated that on this occasion the cattle got on the 10 acres of rye and vetch and the beans that had been replanted after June 26th. Witness said he fed the cattle while they were in the lot, 1500 pounds of hay worth $20 per ton. There was evidence that defendants had notified plaintiff about his cattle getting in the crops; that plaintiff offered to pay damages and agreed that they select someone to assess the same but nothing was ever done about it.
Defendant testified that plaintiff's cattle got on their land August 1st; that they were in some milo-maize, which would have produced 2,000 pounds per acre, and damaged about one-half acre; that at that time milo-maize was bringing .90 cents per bushel.
*121 Witness said that on August 21st there were 52 head of plaintiff's cattle on the farm; that they were in corn and 10 acres of beans, that were planted over. Witness said the beans were in full bloom and the cattle ate and broke them down; that three acres had practically nothing on them and all of them made only 50 bushels. He said the beans would have made 20 bushels per acre, and at the time they were planted or threshed, they would have brought $2.00 per bushel.
There was evidence that 1957 was a very wet year, etc., and that plaintiff knew that the fence was down between the lands and had actual knowledge that his cattle had been on defendants' crops, but we think we have stated such part of the evidence necessary for a decision of the issues presented.
In appeal case No. 7818, defendants recovered a judgment of $500.50 damages to growing crops resulting from the negligence of plaintiff in permitting his cattle on divers occasions to enter upon the Monroe farm, operated by defendant, C. O. Holmes, and eat and destroy growing crops, including wheat, beans, corn, rye and vetch. The prayer of the petition was for $1,500 damages.
There was no request of the court to make a finding of facts and conclusions of law and the judgment of the court must be sustained if supported by the evidence. Section 510.310, subd. 2 RSMo 1949, V.A. M.S.; Tillery v. Crook, Mo.App., 297 S.W.2d 9, 12; Townsend v. Lawrence, Mo.App., 267 S.W.2d 489, 491 [2].
Under point III of appellant's brief, error is assigned that the judgment is not supported by competent evidence. With this contention we agree.
In Beaty v. N. W. Electric Power Cooperative, Inc., Mo.App., 296 S.W.2d 921, 924 [1, 2], the law is stated: "The measure of damages to a growing crop is well stated in Happy v. Kenton, 362 Mo. 1156, 1157, 247 S.W.2d 698, 704, where it is said: `* * * we think there can be no question but that the measure of damage for injury to or destruction of a growing annual crop is, in the case of total destruction: the value of the crop at the time and place of destruction; and as to injury or partial destruction: the difference between the value of the crop immediately before and immediately after the injury. * * * However, to determine the value of a growing annual crop at the time and place of destruction or its value immediately before and immediately after any injury, we have approved a method to ascertain the amount of damages. This, by a consideration of evidence showing the maturity value of the probable crop but for destruction or injury, and by a deduction therefrom of the value of the labor and the expense which, subsequent to its injury or destruction and but for it, would have been required to mature, care for, and market the crop.' See also: Faire v. Burke, 363 Mo. 562, 252 S.W.2d 289, 294, and Welker v. Pankey, Mo.App., 225 S.W.2d 505, 508." Morrill v. Alexander, Mo.App., 215 S.W. 764; Miller v. Sabinske, Mo.App., 322 S.W.2d 941, 948, [9, 10]; Moore v. St. Louis Southwestern Railway Co., Mo.App., 301 S.W.2d 395, 403 [11, 12].
The evidence offered by defendants fails to follow the required rule for the determination of damages to growing crops, either partially or totally destroyed. Cause No. 7818, for that reason, must be reversed and remanded for a new trial. The defendants might submit additional evidence as to damages sustained and make a submissible case. Lance v. Van Winkle, 358 Mo. 143, 213 S.W.2d 401, 404 [10, 11].
We deem it unnecessary to pass on the other assignments of error in case No. 7818.
In appeal case numbered 7819, there is but one alleged error presented for judgment, to-wit: "The Court erred in finding for the respondent W. L. McCrory on Count I of appellant's counterclaim since *122 all the evidence was that respondent W. L. McCrory removed the fence of appellant without his permission."
In this action, counterclaim No. 1, defendant, Monroe, seeks to recover the value of one-half mile of woven wire fence alleged to have been torn down and moved by plaintiff without defendant's consent. The judgment of the trial court was for the plaintiff.
To sustain the alleged error, defendant, Monroe, cites § 537.350 RSMo 1949, V.A. M.S., which provides: "If any person shall voluntarily throw down or open any * * * fences, and leave the same open or down, other than those that lead into his own enclosure, or shall voluntarily throw down, open or remove any partition fence, without giving six months' written notice to the person owning the adjoining fields, if they are cultivated lands, he shall pay to the party injured the sum of five dollars, and double the amount of damages he shall sustain by reason of such * * * fences having been thrown down or opened, with costs; * * *"
Defendant also cites Robinson v. Schiltz, 135 Mo.App. 32, 115 S.W. 472. This was an action to recover damages and the penalty provided by § 4573 Rev.St.1899, (now § 537.350 RSMo 1949, V.A.M.S.), as set out above. The court stated on page 473 of 115 S.W.:
"* * * It is a penal statute as well as, in addition, remedial. Besides compensating the plaintiff, it doubles the compensation and adds outright a penalty of $5. It should be construed with more degree of strictness than an ordinary law for mere compensation. The first clause enacts that, if any person throws down a fence other than one that leads into his own inclosure, he is liable to the party injured by the act. If the fence leads into his own inclosure, then, by the very terms of the statute, there is no liability. It matters not that the fence may also lead into the inclosure of another. * * *
"Another reason for such view of this particular statute is that in a second clause provision is made for the act of tearing down a fence which leads into both inclosures; thus, to great extent, relieving any doubt or necessity for a strained construction of the first clause. The second clause disallows taking down a partition fence without first giving six months' written notice to `the person owning the adjoining fields.' * * *"
Frederick v. Bruckner, 124 Mo.App. 31, 101 S.W. 619 is cited to support this alleged error. This was an action to recover damages and penalty for cutting a wire fence in violation of the section of the statute under consideration. It holds the same as the other authority cited by defendant.
The trouble with defendant's contention is that the evidence does not support the allegations in his cross-claim, to-wit, that plaintiff tore down and removed the one-half mile of fence. The evidence, we think, shows that all plaintiff did was to take the wire off the rotten posts, which was already down on the ground, and leave it where it was. The clear purpose of removing the rotten posts from the wire was to reconstruct the fence. This is shown by the undisputed evidence that plaintiff cut new posts and distributed them along the right-of-way for the purpose of rebuilding. The trial court was justified in finding that defendant, Monroe, failed to make a case and in finding for the plaintiff on count I of the cross-claim.
Judgment is affirmed in appeal case No. 7819.
STONE, P. J., and RUARK, J., concur.
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336 S.W.2d 857 (1960)
MODERN OPTICS, INC., Appellant,
v.
Jesse BUCK, Appellee.
No. 3724.
Court of Civil Appeals of Texas, Waco.
May 19, 1960.
Rehearing Denied July 7, 1960.
Baker, Botts, Andrews & Shepherd, Houston, for appellant.
Bracewell, Reynolds & Patterson, Houston, for appellee.
TIREY, Justice.
This action is a shareholders derivative suit prosecuted by one of the eighty stockholders of Modern Optics, Inc., against Modern Optics, Inc., its President, Chairman of the Board and Executive Vice-President. The suit was filed by three minority stockholders. One of the plaintiffs sold his stock in the corporation after the suit was filed, and he was dismissed; another plaintiff voluntarily withdrew before the trial because he did not wish to *858 prosecute the suit. The trial was had without the aid of a jury and in the judgment we find substantially this recital: that plaintiff, individually, and as a representative of any class of shareholders of Modern Optics, Inc., and Modern Optics, Inc., do have and recover nothing of and from defendants, Virgil Hancock, Frank E. Webster and Murray Rex Arrowsmith; that the plaintiff, do have and recover of and from defendant, Modern Optics, Inc., his expenses and attorney's fees in prosecuting this suit; such expenses being fixed by the Court in the sum of $1,774.47, and attorney's fees in the trial of this case being fixed in the sum of $10,000, and taxed all costs against Modern Optics, Inc. The plaintiff excepted to that part of the judgment wherein the Court denied him any relief against defendants Webster, Hancock and Arrowsmith, and the defendants, Modern Optics, Inc., objected and excepted to the judgment entered against it. Defendant seasonably perfected its appeal to the First Appellate District and the cause is here on transfer. There is no statement of facts on file, and neither side called for findings of fact and conclusions of law, and none was filed. The decree is assailed on one point, it is:
"The trial court erred, as a matter of law, in entering judgment against the corporation for plaintiff's expenses and attorneys' fees, because the corporate defendant recovered nothing in the suit, and the record shows on its face that no relief sought by the suit was granted to the corporation as a result of the filing and prosecution of this lawsuit."
We quote substantially from paragraphs three and four of appellant's statement of the nature and the result of this suit.
In a twenty-page petition the plaintiff alleged numerous acts of fraud and misconduct on the part of the individual defendants and prayed that defendants be enjoined from certain activities during the pendency of the suit, and permanently enjoined from other activities, and asked that judgment be entered against the defendants for the use and benefit of the corporation for almost $200,000 in damages, allegedly resulting to the corporation from the alleged wrongs of the defendants. In addition, plaintiff prayed that he recover his costs including reasonable and necessary expenses. At a hearing on an application for temporary injunction, no relief was granted except to the extent suggested and agreed to by defendants for the purpose of maintaining the status quo during the pendency of the suit. This agreement was not in any way a recognition of any wrongdoing on the part of the defendant, or any right to recover either damages or injunctive relief, but was simply an agreement that the status quo would be maintained during the pendency of the litigation. We have previously stated the nature of the judgment. Appellee, in its reply says that the statement of the nature of the case by appellant is substantially correct with certain exceptions, and among these he states substantially:
(1) That plaintiff, in his petition, alleged a demand had been made upon the Board of Directors by him of the corporation to take action for and on behalf of the corporation against the individual defendants therein named for the purpose of recovering for and on behalf of the corporation certain valid claims which the corporation had against the individuals named, and that the Board wholly failed and refused to take any action and thereby required plaintiff to file this action on behalf of the corporation and all the shareholders;
(2) That in addition to alleging numerous acts of fraud and misconduct on the part of the defendants, also alleged certain fraudulent and wrongful business practices which had continued over varied and extended periods of time. Plaintiff further alleged that the individual defendants were in conspiracy and collusion with certain other members of the Board of Directors, and had set upon a course of action to *859 cause the corporation to pay to the defendant, Hancock, the sum of $75,000;
(3) The petition described at great length the practice which Hancock had followed, while being in control of the corporation for a period of years, and alleged the taking of over $100,000 of corporate funds for his own personal use and benefit, and that such practice had seriously impaired the corporate operation and caused it to operate under most difficult circumstances; that Hancock and Arrowsmith secretly and fraudulently shipped to one of the corporation's customers great quantities of lens, for which the corporation was not being paid, but instead, Hancock and Arrowsmith were appropriating the proceeds thereof for their own use and benefit. Plaintiff asked the court to enjoin temporarily the consummation of the threatened transactions;
(4) That after a two-day hearing by the Court on the right of the plaintiffs to a temporary injunction, that the defendants capitulated and agreed to the entry of an injunction whereby the defendants were restrained and enjoined from paying in cash the $75,000 to Hancock which had been authorized by a resolution and adopted by the Board of Directors; that said injunction further enjoined Hancock from selling or hypothecating in any way of any and all shares of stock then held by him and his wife in the corporation, or any stock which he might acquire until the suit was tried on the merits. Appellee contends that this course of action had the effect of obtaining security for the corporation to satisfy the claims asserted against Hancock. The injunction further enjoined the defendants from selling any treasury or unissued stock of the corporation to any parties to the suit in order to obviate any further unbalancing of stockholder control of the corporation. Appellant, in its brief, among other things says:
"The record in the case further reflects that no adjudication of wrongdoing of any type was ever made against any of the individual defendants, nor was any character of injunctive relief issued in the final decree. The only injunction obtained by this suit was an agreed injunction to maintain the status quo, while the suit was pending. This injunction did not include all the various aspects of relief prayed for in plaintiff's petition. No receiver was ever appointed, no audit was ever made, no officers were ever removed or enjoined from acting, no voting rights were denied.
"The extent of the injunctive relief granted on the temporary hearing was simply to preserve the status quo during the pendency of the lawsuit. Certainly, it cannot be contended that the preservation of the status quo at the time the lawsuit was filed constituted any benefit to the shareholders of the corporation, nor can it be said that it resulted in any recovery of any asset of the corporation."
We do not share appellant's views because of the recitations in the temporary injunction. As we understand the order granting the temporary injunction the parties consumed two days" time in presenting their evidence and argument to the court and defendants made certain recommendations and admissions as to what they were willing for the Court to place in the decree, but in so doing they specifically said that they were agreeable to such decree being entered, but that they were not admitting that there had been any improper action on the part of the corporation, or any of the defendants in this suit which required an injunction to be granted, but that they are willing that it be granted in the best interest of the company so that the rights of the opposing parties will not be jeopardized in any respect while waiting for trial on the merits. The Court, in its order on the temporary injunction, recited among other things:
"* * * that defendants have consented to the entry of the following *860 temporary injunction and that the plaintiffs have agreed to the following temporary injunction; and it further appearing to the Court that the plaintiffs are so entitled to said temporary injunction as herein granted, same being within the allegations and prayer of the plaintiffs' petition."
The Court then decreed:
(1) That defendants are expressly enjoined and restrained from paying in cash the $75,000 authorized pursuant to a resolution adopted by the Board of Directors of Modern Optics, Inc., at the meeting held on September 24, 1956, as a consideration for the assignment dated June 22, 1946, or Virgil H. Hancock's right, title and claim in and to a certain contract or memorandum of agreement by and between The Univis Corporation and Virgil H. Hancock, dated October 11, 1932, but defendants are expressly not enjoined nor restrained from crediting the sum of $75,000 on the books of the corporation against the loan account of Virgil H. Hancock, which carries an outstanding balance of $74,755.81;
(2) Enjoining during the pendency of this suit the defendant, Virgil H. Hancock, from selling, hypothecating, mortgaging or disposing in any way of any and all shares of stock now held by him or his wife in Modern Optics, Inc., or any stock which he might acquire in the company from this time until this lawsuit is tried on the merits;
(3) Enjoining during the pendency of this suit the defendants from selling any of the treasury or unissued stock of Modern Optics, Inc., to any of the parties to this suit; provided that this order shall be subject to further order of the Court pending final trial of this suit upon proper notice and hearing, and subject to amendment by agreement of the parties to this suit; said writ to be accompanied by a true and correct copy of plaintiffs' petition.
This temporary order was entered on the 8th day of January, 1957, but stated that it became effective November 23, 1956. It appears to us that the recitations in the temporary injunction show that the corporation did get substantial gains from that order, and that the corporation's admission through its counsel that it agreed that the Court should make such order is without any significance, because the Court recites that the plaintiffs are entitled to said temporary injunction. Appellant relies on the following authorities to sustain its view: Rio Grande Fire Ins. Co. v. Herder, Tex.Civ. App., 180 S.W. 1150; 3 Hildebrand, Texas Corporations, Sec. 774; 10B Texas Jur., Corporations, Sec. 282, and Levin v. Martin C. Levin Investment Co., 1954, 123 Cal. App. 2d 158, 266 P.2d 552; Burley Tobacco Co. v. Vest, 1915, 165 Ky. 762, 178 S.W. 1102; McArthur v. John McArthur Co., 1919, 39 Cal. App. 704, 179 P. 700; Alexander v. Atlanta & W. P. R. Co., 1901, 113 Ga. 193, 38 S.E. 772, 54 L.R.A. 305; Hildreth v. Western Realty Co., 1932, 62 N.D. 233, 242 N.W. 679; Joyce v. Congdon, 1921, 114 Wash. 239, 195 P. 29. We think appellant's decisions are not applicable to the peculiar factual situation that here exists. Going back to the temporary injunction, this matter consumed two days' time in November 1956, and it appears the case went to trial on the merits on the 29th day of January, 1959, and that the Court entered the final judgment on the 3rd day of August, 1959. So, it is obvious from the record made that the attorneys necessarily gave much time to the preparation of this case for trial, and that it remained on their docket for attention from the date it was filed on October 9, 1956, until final judgment was entered. We think it is well settled that in these cases where there is no statement of facts in the record that it is the rule that in the absence of a statement of facts it will be presumed where the transcript record is sufficient that the Trial Court's judgment is supported by the evidence. See statement of the rule by the Supreme Court in Smith v. Higginbotham, 138 Tex. 227, 158 S.W.2d 481, Com. of App., opinion adopted. See Point 4 on *861 page 485 of 158 S.W.2d, and cases there cited. Our Supreme Court has not seen fit to change the foregoing rule. From consideration of the instruments shown in the transcript and from the recitals contained in the order granting the temporary injunction, we are of the view that the transcript record is sufficient, and that the Trial Court's judgment is supported by the evidence. We think the record shows that the Trial Court gave much consideration to this cause and we think that such Court would not have entered the judgment it did and fixed the expenses and attorneys' fees in the amount of $10,000 against the corporation if the Court had not been of the view that such judgment was fair and just. Moreover, the amount of attorneys' fees awarded is not assailed, and the appellant is relying on one point only, which we have heretofore stated. In Schechtman v. Wolfson, 2 Cir., 244 F.2d 537, 540, we find this statement of the rule:
"The modern equity practice is to allow counsel fees to successful prosecutors to derivative suits although no judgment has been obtained if they show substantial benefit to the corporation through their efforts, * * *"
See also Pergament v. Kaiser-Frazer Corp., 6 Cir., 224 F.2d 80; Baker v. Seattle-Tacoma Power Co., 61 Wash. 578, 112 P. 647; Greenough v. Coeur D'Alenes Lead Co., 52 Idaho 599, 18 P.2d 288; Holthusen v. Edward G. Budd Mfg. Co., D.C.Pa.1944, 55 F. Supp. 945.
Surely the Trial Judge must have been of the view that the filing of the plaintiffs' suit and the prosecution thereof to final judgment was of benefit to the corporation; otherwise he would not have allowed the recovery of expenses and attorneys' fees. The foregoing rule was applied by our 5th Circuit in Cannon v. Parker, 152 F.2d 706, certiorari denied 327 U.S. 806, 66 S. Ct. 965, 90 L. Ed. 1031. See also 3 Tex.Jur.2d, Appeal and ErrorCivil, Section 452; Flint v. Knox et al., Tex.Civ.App.1943, 173 S.W.2d 214, er. ref. w. o. m.; 3 Hildebrand, Texas Corporations, Section 774 (1942), Pocket Part (1950); 10B Tex.Jur., Corporations, Section 282 (1958); "The Counsel Fee in Stockholders' Derivative Suits", by Geo. D. Hornstein, 39 Columbia L.Rev. 784, 798, 802, 807 and 809. See also 39 Columbia Law Review, pages 784, 802 and 807 and 809.
We think that this record supports the view that the plaintiffs' suit was of some benefit to the corporation, and since the amount awarded for expenses and attorneys' fees is not assailed, and since there is no statement of facts accompanying the record, we are of the view that we must sustain the implied findings of the Trial Court that such suit was necessary and that the Corporation benefited thereby, and affirm its judgment. Accordingly, the judgment of the Trial Court is affirmed.
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336 S.W.2d 268 (1960)
Edwin THURMON et al., Appellants,
v.
ATLANTIC REFINING COMPANY, Appellee.
No. 15652.
Court of Civil Appeals of Texas, Dallas.
May 6, 1960.
Rehearing Denied June 3, 1960.
*269 Walker F. Means, Pecos, John A. Menefee, Rankin, for appellants.
A. C. Grosse, Dallas, H. E. McRae, W. B. Browder, Jr., and Stubbeman, McRae, Sealy & Laughlin, Midland, for appellee.
YOUNG, Justice.
Rule 166-A, Texas Rules of Civil Procedure, Summary Judgment Proceedings. To the suit of appellants for damages resulting from breach of an alleged oral agreement for "farm out" of described lease holds in Pecos County, Texas; that is, to execute written leases for oil and gas, defendant interposed the Statute of Frauds. The motion was heard along with affidavits of the parties and depositions on file; and the Court, being of opinion that no genuine issue of any material fact was there raised, accordingly rendered judgment that plaintiffs take nothing by their suit, plaintiffs appealing in consequence.
Inception of the action of plaintiffs was in July 1954; and both before and after said date defendant company was owner of the oil and gas lease hold estates in sections 59, 60, 61 and 62 in Block 8, H & G N R R Company Survey, Pecos County; its leases convering various interests in the minerals being then in force by reason of the production of oil in paying quantities from wells located on the property. Appellee's motion for summary judgment, sworn to by Alan D. Knox of Midland, Texas was countered by the affidavit of plaintiff Thurmon; and as its factual content must be taken as true for purposes of this appeal, same will now be quoted in essential part, affiant first asserting personal knowledge of every statement of fact made therein:
"2. Defendant is in error in stating that the facts stated by defendant in Paragraph 2 of defendant's Motion for Summary Judgment are all uncontroverted, and in this connection affiant states:
"a. In connection with sub-paragraph 2, of Paragraph 2, of Defendant's Motion for Summary Judgment, it was stated and represented to me by Herbert Wales, the South Division Land manager of Atlantic Refining Company, that in order to establish the title of Atlantic Refining Company to the lease with regard to which I was seeking a farm-out it would be necessary to show the continued production of a well on the south part of Section 59, Block 8, H & GN R R Co. Survey, *270 Pecos County, Texas, being operated by A. H. Higle, or, if that could not be done, to obtain the signature of a division order by Mr. Higle and bring about the payment of the money for the production of oil for the period in question to the various owners so that they would be bound by the acceptance of the same. Mr. Wales has testified in his deposition, at page 38 thereof, that, "The obtaining of the information about Mr. Higle's well would determine what interest Atlantic owned under the tracts we were discussing.' There is testimony of Mr. Wales to the same general effect at other points in his said deposition.
"b. In connection with sub-paragraph 3, of said Paragraph 2, of Defendant's Motion for Summary Judgment, Herbert Wales himself, at the time of my first meeting with him at the Atlantic offices in Midland, in July 1954, told me that he was South Division Land Manager for Atlantic Refining Company, and the Secretary at the desk in the Atlantic Refining Company also told me that Mr. Wales was South Division Land Manager for Atlantic Refining Company and that I would have to see him if I wanted to farm-out land in Pecos County, I ashed her if there was anyone else I could see. She told me that I would have to see Mr. Wales because he was South Division Land Manager and had charge of the area. On several occasions Mr. Herbert Wales told me that anyone who desired to obtain a farm-out of oil and gas leases in the South Division, including Pecos County, would have to come through him. At the time of my second conversation with Mr. Wales, when Mr. Engel was with me, at the offices of Atlantic Refining Company, in Midland, Texas, on the 29th day of July, 1954, Mr. Wales produced a letter and said that he had good news for us; that the Atlantic Refining Company would accept a one-sixteenth override, instead of a one-eighth, as previously authorized, if we would accept a ten acre cure-out instead of a twenty-acre cure-out. He showed us a letter, but he did not offer to let us read it, and I did not see by whom it was signed. He said at that time that I had a contract, and that it would not be necessary for me to return to Midland; that he would mail the contract to my attorney, at Pecos, Texas. He told me that he would have us drilling by September 1st, 1954; that he had some title curative work to do, but that he would have us drilling by that time. In my first discussion with Mr. Wales, he had stated to me that he was authorized to make a farm-out for a one-eighth over-ride, but that he would have to submit my proposition for a one-sixteenth over-ride to Dallas, and his statement which I have just mentioned on the occasion of my talk with him on July 29, 1954, was his notification to me of the answer from Dallas with regard to the one-sixteenth override. At all times Mr. Wales represented to me that he had full authority to negotiate with me a farm-out contract, and I relied upon his representation.
"c. In connection with sub-paragraph 10 of said Paragraph 2 of Defendant's Motion for Summary Judgment, wherein it is stated by Defendant that no payment of consideration was ever made to Atlantic by Thurmon or the other two plaintiffs for the claimed oral agreement to assign a part of the oil and gas lease, reference is here made to the depositions of Edwin Thurmon and A. H. Higle.
"Reference is also made in this connection to the deposition of Carl Engel and Francis K. Campbell.
"The depositions of Edwin Thurmon and A. H. Higle show that Edwin Thurmon, at the request of Herbert Wales, South Division Land Manager *271 of Atlantic Refining Company, and in behalf of his contract, obtained evidence of the production of the well operated by A. H. Higle and also helped to bring about the signature of A. H. Higle to the division order desired by Atlantic Refining Company.
"In this connection, I, Edwin Thurmon, spent more than one hundred hours and made at least one half dozen telephone calls at my own expense, and incurred automobile expense, in obtaining evidence of the production of the Higle well, for Atlantic Refining Company. These endeavors on my part were in partial performance of my contract with Atlantic Refining Company, and in addition there to I obtained necessary financial backing for carrying out my obligations under the contract and made arrangements with Mr. Engel for the drilling of the well and with Mr. Campbell for equipping the well. Mr. Engel and Mr. Campbell in turn held themselves in readiness. Mr. Engel was at all times ready, willing and able to proceed with the drilling of the well, and Mr. Campbell was at all times ready, willing and able to furnish the necessary equipment for the well.
"In addition to the Jumbo J. Fort Worth Spudder mentioned by Mr. Engel in his deposition, he had a half interest in a Super D. Fort Worth Spudder which he owned jointly with a partner and which was available for drilling the well and also had the right to use at any time a Super D. Fort Worth Spudder owned by his father, who had retired from active oil field contracting.
"d. In connection with sub-paragraph 11 of said Paragraph 2 of the Defendant's Motion for Summary Judgment, possession of the premises was actually taken and asserted by the plaintiffs by staking their locations upon the premises at the request of Mr. Herbert Wales. During my second conversation with him, in the presence of Mr. Engel, on July 29, 1954, he had us show him on a map where our location would be, and he marked on the map, and he asked us to stake our locations on the ground. Possession of the premises was thus given by Atlantic Refining Company to the plaintiffs and was thus taken by the plaintiffs. Reference is here made to the testimony of Mr. A. H. Higle, in his deposition, that I took him over the leases.
"e. Defendant's conclusion as to the effect of the testimony, are, of course, only conclusions, and the depositions of the various witnesses must be looked to in order to determine what was actually said by them."
Points of appeal will now be quoted:
"1. The claim of appellants as alleged in their First Amended Original Petition, and as supported by affidavit and depositions, is not rendered unenforceable by the Statute of Frauds, because: (a) The consideration passing from the appellants, Edwin Thurmon and his two associates, Francis K. Campbell and Carl Engel to the appellee, Atlantic Refining Company, was performed by them to the full extent permitted by the appellee. (b) Possession of the premises in question was delivered by the Atlantic Refining Company to the appellants, and was taken by the appellants. (c) The pleadings, supporting affidavit and depositions clearly show the existence of such facts as would make the transaction a fraud upon the appellants if not enforced."
Appellees in counter-point maintain the correctness of the Court's rendition because:
"* * * the oral agreement claimed by appellants was within the bar of the Statute of Frauds and the Statute of Conveyances, because such agreement concerned realty, it was oral, and there *272 had been neither payment of consideration, exclusive possession by the vendee, nor the making of a valuable or permanent improvements."
In this connection Art. 1288, Vernon's Ann. Civ.St., provides that no estate of inheritance or free-hold in lands, shall be conveyed unless the conveyance be in writing. Art. 3995, Vernon's Ann.Civ.St., also provides in part:
"No action shall be brought in any court in any of the following cases, unless the promise or agreement upon which such action shall be brought, or some memorandum thereof, shall be in writing and signed by the party to be charged therewith or by some person by him thereunto authorized: * * *
"4. Upon any contract for the sale of real estate or the lease thereof for a longer term than one year;"
Relevant to the law question thus raised by the parties is the following statement of principle from Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114, at page 1116, 15 A.L.R. 216:
"From an early time it has been the rule of this court, steadily adhered to, that to relieve a parol sale of land from the operation of the statute of frauds, three things were necessary: 1. Payment of the consideration, whether it be in money or services. 2. Possession by the vendee. And 3. The making by the vendee of valuable and permanent improvements upon the land with the consent of the vendor; or, without such improvement, the presence of such facts as would make the transaction a fraud upon the purchaser if it were not enforced. Payment of the consideration, though it be a payment in full, is not sufficient. This has been the law since Garner v. Stubblefield, 5 Tex. 552. Nor is possession of the premises by the vendee. Ann Berta Lodge v. Leverton, 42 Tex. 18. Each of these three elements is indispensable, and they must all exist.
"Regardless of the disposition of other courts to engraft other, exceptions upon a plain and salutary statute which had its origin in the prolific frauds and perjuries with which parol contracts concerning lands abounded, this court has always refused to further relax the statute. We think the wisdom of its course has been justified."
Above doctrine has been uniformly approved in more recent Supreme Court holdings. See Chevalier v. Lane's Inc., 147 Tex. 106, 213 S.W.2d 530, 6 A.L.R. 2d 1045; Cowden v. Bell, 157 Tex. 44, 300 S.W.2d 286; Pappas v. Gounaris, Tex., 311 S.W.2d 644.
Of the elements indispensable to relief against operation of the Statute of Frauds, according to above rule is mentioned "2. Possession by the vendee. And 3. The making by the vendee of valuable and permanent improvements upon the land with consent of the vendor." Here there was admittedly no improvements; in lieu thereof appellants claim "the presence of such facts as would make the transaction a fraud upon the purchaser (plaintiffs) if it were not enforced."
Along with Thurmon's affidavit are the depositions of all plaintiffs (Thurmon, Campbell and Engel). Bearing on the showing of "possession" necessarily incident to an avoidance of the Statute are the following facts: The affidavit of Thurmon recited "that possession of the premises was actually taken and asserted by the plaintiffs by staking their locations upon the premises at the request of Mr. Herbert Wales. During my second conversation with him in the presence of Mr. Engel, on July 29, 1954, he had us show him on a map where our locations would be, and he marked them on the map, and he asked us to stake our locations on the ground. Possession of the premises was thus given by Atlantic Refining Company *273 to the plaintiffs and was thus taken by the plaintiffs." Thurmon's deposition testimony on the subject is as follows:
"Q. Did you go on the property? A. Yes, sir.
"Q. When? A. When he told me to go and stake the location.
"Q. You went yourself? A. Yes, sir.
"Q. Who went with you? A. Mr. Engel.
"Q. Who else? A. Just the two of us.
"Q. Did you take a surveyor? A. No, we didn't take a surveyor.
"Q. What did you do then? A. We put our stakes.
"Q. What do you mean by that? A. We set our stake there where we showed him on his map where we would drill our well.
"Q. Now you see I don't know all these things and certainly the judge may not know all of them, and the reason I was asking, what did you mean that you set a stake? Just tell us what you do. A. Well, we just put a stake in the ground at that point there.
"Q. Did you dig any ditches? A. No.
"Q. Any pits? A. No, just done as he told us to just stake our location.
"Q. Well, now I asked you what you did. Did you dig any pits or anything like that? A. We dug no pits, we did just exactly what I said, set our stakes, set our location."
Plaintiff Engel testified similarly, viz.:
"Q. Did you go out on the lease? A. Yes, sir.
"Q. And what did you do? A. We stepped off about 50 feet from each well there and staked off about where we thought the well would be.
"Q. And then what did you do? A. That's all.
"Q. Did you actually drive a stake down? A. Yes, sir.
"Q. Did you do anything else there? A. No, that's all.
"Q. Well, actually that's all you ever did on that lease? A. Yes, sir."
As already stated the "farm-out" in question involved the north 160 acres, Section 59 of said Survey, known as the "Netterville Lease Tract"; and it was conclusively established by the deposition of Higle, a well owner, that the tract was actually occupied by defendant and other lease holders along with producing and taking of oil from six or eight wells.
The possession required under Hooks v. Bridgewater, supra, is possession that is exclusive and adverse to the owner of the title to the land. "In order for possession to serve as one of the elements necessary to remove the contract from the operation of the Statute of Frauds, the possession must be exclusive and adverse to the donor. There must be a complete surrender of possession by the donor. Hooks v. Bridgewater, supra; Mulkey v. Allen, Tex.Com. App., 36 S.W.2d 198; Thornton v. Central Loan Co., Tex.Civ.App., 164 S.W.2d 248, writ refused." Mueller v. Banks, Tex.Civ. App., 300 S.W.2d 762, 764. Discussing the requirement of a full and complete transfer of possession our Supreme Court in Cowden v. Bell, 157 Tex. 44, 300 S.W.2d 286, has stated: "* * * as `a further strong reason' for the requirement of transfer of possession in cases of alleged parol sales of land, to wit, `that without it the existence of the contract rests altogether in parol evidence, * * *. If, however, the purchaser be let into possession, there is furnished by an affirmative act of the owner himself at least a corroborative fact that the *274 contract was actually made.'" (Emphasis ours.)
The possession above evidenced was at most constructive rather than actual dominion and control. Otherwise stated, in our opinion, the driving of "three stakes" amounted to neither surrender of possession nor valuable improvements; and as held in Hooks v. Bridgewater, supra, "if there has been no surrender of the possession of the land, the contract is not within the rule and is incapable of enforcement."
But if we be mistaken in the conclusion thus reached, then an affirmance of this case must surely rest upon the following grounds: Appellants admit to absence of permanent and valuable improvements; in lieu thereof under Hooks v. Bridgewater, supra, there must be a showing of such facts as would make the transaction a fraud upon the purchaser if it were not enforced. The fraud just referred to involves a state of facts entirely dissimilar to that relied upon by appellants as sufficient to avoid the Statute of Frauds. They say that (1) necessary financial backing for carrying out the contract was obtained; (2) Engel had arranged for drilling of the well; (3) Campbell for supplying all equipment; (4) Thurmon spending over 100 hours and incurring personal expenses "in obtaining evidence necessary to establish the validity of appellee's title; thereby doing everything possible for them to do in actual performance of the consideration of their oral agreement with appellee." (Emphasis ours.)
"The performance of personal services, pursuant to an oral land contract, does not constitute in itself such part performance of the agreement as to make the statute inapplicable. The performance is not sufficient to raise the question of fraud and require specific performance of the agreement. If the service is performed, it could amount to only a consideration for the land, and it is well settled that payment of the purchase money is not sufficient to enforce performance." 20-A Tex.Jur. § 147, p. 428. In Terry v. Craft, Tex.Civ.App., 87 S.W. 844, 845, it was stated that the fact that Mrs. Craft (plaintiff) rendered services for Emerson, the deceased, "is not sufficient to raise the question of fraud and require the enforcement of specific performance, for, if such service was performed, it could amount to only a consideration for the land, and it is well settled that the payment of the purchase money is not sufficient to enforce performance." The facts claimed in the instant case as making the transaction a fraud upon the appellants are wholly lacking in elements necessary to the showing of fraud as required under Hooks v. Bridgewater, supra, or in Duke v. Joseph, Tex.Civ.App., 213 S.W.2d 535, 538, wr. ref., where, in reliance upon an oral contract for assignment of a written lease for more than one year, Duke voluntarily retired from the Army at a heavy reduction of salary. Refusing the relief prayed, Judge McClendon in this case quoted the following excerpts from Santoro v. Mack, 108 Conn. 683, 145 A. 273, that has particular application here:
"Under the rule well established by the authorities it must appear that these acts are of such a character that they can be reasonably and naturally accounted for in no other way than that they were performed in pursuance of a contract between the parties, and, though they cannot indicate all the terms of the agreement, they must be in conformity with its provisions. * * * The acts claimed by the plaintiff as above stated, were not, so far as appears, of this character. They do not compel the inference that there was some contract by which these acts were required of the plaintiff, and therefore explainable upon no other theory. We are not forced to the conclusion by anything which appears of record, that these acts were done in pursuance of the requirements imposed by a contract between the parties. They are of a purely preliminary or *275 collateral character, done by the plaintiff only in anticipation of the actual performance of a contract by both parties. One of the most common acts of part performance, and one which illustrates the distinction to be drawn, is the act of giving possession of the property to the prospective purchaser."
With further reference to all acts and circumstances set forth in the affidavit of Thurmon at hand, the following excerpt from Duke's appeal, supra [213 S.W.2d 525, 538], is likewise relevant that "We do not find any case in this State which holds that acts of the vendee, not inherently related or corroborative of the existence of the contract, and standing alone have been held sufficient to take the case out of the statute of frauds."
The trial court has correctly held that there exists in this record no genuine issue of any material facts; and the judgment to such effect is accordingly affirmed.
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50 B.R. 324 (1984)
In re Gary E. HEXOM, Debtor.
Civ. No. A4-84-81.
United States District Court, D. North Dakota, Northwestern Division.
December 31, 1984.
Phillip D. Armstrong, Minot, N.D., for plaintiff.
Ross H. Espeseth, Bismarck, N.D., for defendant.
MEMORANDUM AND ORDER
VAN SICKLE, District Judge.
The sole issue in this case is whether the provision under North Dakota law which allows absolute exemption from claims of creditors for the surrender value of a life insurance policy (N.D.Cent.Code § 26-10-17 (Supp.1983)) supersedes a conflicting North Dakota provision that limits the accrued dividends, interest, or cash value of an unmatured life insurance policy to $4,000 (N.D.Cent.Code § 28-22-03.1 (Supp. 1983)).[1]
Since this issue is an issue of law, little factual background is necessary. On January 24, 1984, the bankruptcy court ruled that the cash proceeds of the life insurance policy were not exempt because the policy had been cashed in by the debtor. By a motion to amend the order, the debtor informed the bankruptcy court that the policy had not yet been cashed. The bankruptcy court thereby amended his previous order on February 29th, holding that § 26-10-17 "creates a claim for exemption for a debtor in North Dakota under 11 U.S.C. § 522(d)" for an uncashed policy and that "Section 26-10-17 of the North Dakota Century Code protects life insurance policies from involuntary conversion to cash." The objection to the debtor's claim of exemption was therefore dismissed, and the *325 appeal of this dismissal by the trustee followed.[2]
In 1981, the North Dakota legislature enacted § 28-22-03.1 for the purpose of replacing the federal bankruptcy exemptions with the state exemptions. See 1981 N.D.Sess.Laws ch. 335; see also 11 U.S.C. § 522(b) (Supp. II 1978). According to the legislative history of the statute, the legislature had until January 1, 1983, to enact its own exemptions "in lieu of the federal." According to one of the bill's proponents, "whichever state exemptions are adopted can be amended at a future session. If we don't act, we cannot amend the federal exemptions on a state level." House Industry, Business and Labor Committee Hearing on Sen. Bill No. 2429 (Feb. 16, 1981) (statement of Al Wolf).
The relevant portion of § 28-22-03.1 reads as follows:
In addition to the exemptions provided herein, a resident of the state may select:
. . . . .
3. Accrued dividend, interest, or cash value of an unmatured life insurance policy not to exceed four thousand dollars.
In 1983, the North Dakota legislature enacted § 26-10-17, which reads as follows:
The surrender value of any policy of life insurance which, upon the death of the insured, would be payable to the wife, husband, or children or any relative of the insured dependent, or likely to be dependent, upon the insured for support, shall be exempted absolutely from the claims of creditors of the insured. No creditor of the insured, and no court or officer of a court acting for any such creditors, shall have the right under any circumstances to elect for the insured to have such policy of insurance surrendered or in anywise converted into money, and no such policy of life insurance or property right therein belonging to the holder, and no value thereof, shall be subject to seizure under any process of any court under any circumstance.
1983 N.D.Sess.Laws ch. 172, § 35 (codified at N.D.Cent.Code § 26-10-17 (Supp.1983)).
Appellant's main argument is that § 28-22-03.1 must be applied to this situation because it is more specific than § 26-10-17. In support of this proposition, the appellant quotes a portion (but not the last clause) of N.D.Cent.Code § 1-02-07 (1975), one of the state's rules of construction. The complete text of this statute reads as follows:
Whenever a general provision in a statute shall be in conflict with a special provision in the same or in another statute, the two shall be construed, if possible, so that effect may be given to both provisions, but if the conflict between the two provisions is irreconcilable the special provision shall prevail and shall be construed as an exception to the general provision, unless the general provision shall be enacted later and it shall be the manifest legislative intent that such general provision shall prevail.
The 1981 statute (§ 28-22-03.1) is more specific only in its limiting of the insurance to $4,000. Although the legislative history demonstrates that the enactment of the bill was so that its provisions could be applied in bankruptcy proceedings, nothing in the statute limits its application to bankruptcy matters. According to § 28-22-01, the exemptions apply to attachment or mesne processes, levy and sale upon execution, and any other final process issued from any court. Section 28-22-03.1 is therefore not more specific in regards to its application to bankruptcy matters.
But even if the 1981 statute was more specific than the 1983 statute, it is clear from the language of § 26-10-17 that the legislature's manifest intent was to "absolutely exempt from the creditors of the insured" the surrender value of any policy *326 of life insurance. The statute also states that "no such policy of life insurance or property right therein belong to the holder, and no value thereof, shall be subject to seizure under any process of any court under any circumstance." The state's intention is clear. Section 28-22-03.1 has been superseded by § 26-10-17.
The appellant also argues that a debtor in bankruptcy must select exemptions only from Chapter 28-22, N.D.Cent.Code. Such a construction would negate, in the realm of bankruptcy law, at least eleven other statutory provisions that allow exemptions.[3] But the text of the 1981 act directly contradicts this view:
In accordance with the provisions of section 522(b) of the Bankruptcy Reform Act of 1978 (Pub.L. 95-589; 92 Stat. 2586; 11 U.S.C. 522(b)), residents of this state shall not be entitled to the federal exemptions provided in section 522(d) of the Bankruptcy Reform Act of 1978. The residents of this state shall be limited to claiming those exemptions allowable under North Dakota law.
1981 N.D.Sess.Laws ch. 335 (emphasis added) (codified at N.D.Cent.Code § 28-22-17 (Supp.1983)). Had the legislature intended ch. 28-22 to supersede all other statutory exemptions (in bankruptcy proceedings and otherwise), it would have so stated. Instead, the legislature specifically referred to the exemptions "allowable under North Dakota law."[4] Furthermore, even if the 1981 act had limited exemptions to ch. 28-22, section 26-10-17 would constitute a subsequent modification of ch. 28-22 since, by adopting the 1981 act, the legislature retained its power to alter the exemptions created by that act. See 11 U.S.C. § 522(b)(2)(A) (Supp. II 1978); see also statement of Al Wolf, quoted supra at 325.
Based on the entire file, the order of the bankruptcy court dated February 29, 1984, is AFFIRMED.
NOTES
[1] In the notice of appeal, the appellant listed four issues on appeal. However, the issue listed above is the only one addressed by arguments in the appellant's briefs.
[2] Although the bankruptcy court did not discuss the conflict between the two statutes, it is clear that he was cognizant of this fact by his quoting of the relevant portions of each statute in his amended order.
It is also apparent that the bankruptcy court, by its decision, ruled that the trustee failed to carry his burden of proof that the exemption was not properly claimed. See Bankr. Rule 4003(c).
[3] See, e.g., N.D.Cent.Code §§ 15-39.1-13 (teacher's retirement annuities and refunds); 18-05-11 (fireman's pensions); 26.1-15-32 (fraternal benefit society payments); 37-25-07 (Vietnam veteran's bonus); 39-03.1-23 (highway patrol retirement payments); 40-45-23 (police pensions); 40-46-22 (municipal employee pensions); 50-09-15 (aid to dependent children); 52-06-30 (unemployment benefits); 54-52-12 (state employee retirement benefits); 65-05-29 (worker's compensation benefits). See generally Laurence, North Dakota's New Rules Respecting Garnishment and the Property Exempt Therefrom, 58 N.D.L.Rev. 183, 229-34 (1982).
According to Professor Laurence, § 28-22-03.1 applies only to bankruptcy proceedings and creates a bifurcated scheme of exemptions under North Dakota law. Id. at 235. Professor Laurence properly points out the problems that such a situation would cause. However, as discussed above, the legislature has not limited N.D.Cent.Code ch. 28-22 to bankruptcy matters. See also note 4 supra (headings of enactments have no legal significane).
[4] Only one small aspect of the legislative history of § 28-22-03.1 could be used to support the view that ch. 28-22 constitutes the only exemptions available under North Dakota law. The testimony given in support of Senate Bill No. 2429 from the Independent Community Banks of North Dakota included the following statement:
We believe that the state exemptions should be adopted, as they exist under Chapter 28-22 of the North Dakota Century Code. In addition thereto, several exemptions contained in the federal list of exemptions should be adopted. Those are [the exemptions listed in the bill].
One person's comment to one of the legislative committees does not constitute legislative intent, especially when the text of the statute which is adopted by the full legislature directly contradicts with the individual's testimony.
The only other means of support for this view is derived from § 28-22-03.1's heading, "Additional Bankruptcy Exemptions." As the appellee points out, under North Dakota law the headings used on statutes have no legal significance. N.D.Cent.Code § 1-02-12 (1975). In addition, the text of chapter 28-22 does not limit its application to bankruptcy matters. See N.D. Cent.Code § 28-22-01 (Supp.1983).
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50 B.R. 549 (1985)
In re PIED PIPER CASUALS, INC., Debtor.
Robert M. FISHER, as Trustee of Pied Piper Casuals, Inc., Plaintiff,
v.
The INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Defendant.
Bankruptcy No. 84 B 10290, Adv. No. 84-6206A.
United States Bankruptcy Court, S.D. New York.
June 13, 1985.
Otterbourg, Steindler, Houston & Rosen, P.C. by Richard J. Rubin, New York City, for plaintiff.
Greenhill, Speyer & Thurm by Robert M. Silverstein, New York City, for defendant.
OPINION AND ORDER
HOWARD C. BUSCHMAN, III, Bankruptcy Judge.
This case raises the issue of whether an action by a trustee upon an insurance policy seeking reimbursement for losses due to theft is a core proceeding under 28 U.S.C. § 157(b) (1984).
I
Pied Piper Casuals, Inc. ("Debtor" or "Pied Piper") was a manufacturer of ladies apparel. The defendant, Insurance Company of the State of Pennsylvania ("I.C.S.P."), issued Pied Piper an insurance policy covering losses due to theft and other non-excluded causes during the policy period, October 7, 1983 to October 7, 1984. Similar policies had been issued for two prior annual periods.
According to the complaint, Pied Piper, in January 1984, first discovered losses due to thefts commencing in April 1982 and continuing thereafter. It claims to have given written notice to defendant's agent on the date of discovery of the theft, and once I.C.S.P.'s agent was thus informed, he asserted that the full extent of the loss could not be determined until completion of a police investigation.
Shortly thereafter, on February 29, 1984, Pied Piper filed a voluntary petition seeking reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. (1984) (the "Code"). The case was subsequently converted to Chapter 7, see In re Pied Piper Casuals, Inc., 40 B.R. 723 (Bankr.S.D.N.Y.1984), and Robert Fisher named Trustee.
It is further alleged that the Trustee, through counsel, notified the insurance *550 company's adjuster on June 18, 1984 that the police investigation had revealed thefts. Upon being contacted by an accounting firm seeking to examine Pied Piper's books and records, the Trustee requested proof of authority to act for the insurance company or adjuster. None was furnished. The Trustee claims an insured loss of $1,407,208 during the time in which the current policy and its predecessor policies were in full force and effect.
In answering the complaint, I.C.S.P. asserted, inter alia, a defense based on a provision of the policy requiring action on the policy within 12 months of the loss and the filing of a written proof of loss within 60 days of discovery. Other defenses based on exclusions from coverage are also asserted.
Prior to filing its answer, the I.C.S.P. served a motion seeking an order of this Court to remove the proceeding to the district court. At the hearing, the provisions of 28 U.S.C. § 157(d) were called to the attention of counsel. That section requires that a motion to withdraw a reference be made in the district court. The motion was therefore dismissed. Upon the insurance company's subsequent motion, the district court, per Judge Sweet, denied the motion as premature since the parties had not sought the determination of this Court as to whether the matter was a core proceeding. See Fisher v. Insurance Company of the State of Pennsylvania, 48 B.R. 294, 12 B.C.D. 1047, (CCH) Bankr.L.Rep. [1984-1985 Trans Binder] ¶ 70,324 (S.D.N.Y.1985) Hence, I.C.S.P. moved before this court for an order determining the nature of this proceeding under § 28 U.S.C. § 157. It asserts that the proceeding is a related proceeding as to which this court is to recommend to the district court findings of fact and conclusions of law. The Trustee, conversely, asserts that the proceeding is a core proceeding to be heard and determined here.
II
As adjunct to the district court, bankruptcy courts can "hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11." 28 U.S.C. § 157(b)(1). The provisions regarding non-core proceedings are different. Unless the parties consent, a bankruptcy judge cannot enter final orders in a non-core proceeding, but must instead submit "proposed findings of fact and conclusions of law to the district court," who may then review "de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).
Tailored to limit the bankruptcy's court's power under the Bankruptcy Act of 1978, 11 U.S.C. § 101 et seq. (1984) (the "Code"), to fit within the Supreme Court's plurality decision in Northern Pipeline Const. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 598 (1982), the term core proceeding is to be interpreted in light of fifteen types of core proceedings set forth in 28 U.S.C. § 157(b). That list, however, is exemplary only and does not limit the cases which fall thereunder.
Here, the Trustee's cause of action is for collection of the proceeds of an insurance policy. The company defends with an argument that the coverage does not extend to the particular theft, and that no proof of loss statement as such has been filed. The proceeding, accordingly, appears to be a proceeding seeking an order to turn over property of the estate. Such a proceeding is denominated as a core proceeding in § 157(b)(2)(E).
A turnover proceeding is defined by Section 542(b) of the Code to include an action based on "a debt that is property of the estate and that is matured, payable on demand, or payable on order." "[A]n examination of the legislative history compels a broad view of § 542's turnover power." In re Sunrise Equipment and Development Corp., 24 B.R. 26, 27 (Bankr.D.Ariz.1982).
An insurance policy is property of the estate under § 541 of the Code. Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 10 B.C.D. 1272 (5th Cir.1983); In re Moskowitz, 13 B.R. 357, 7 B.C.D. 1314 *551 (Bankr.S.D.N.Y.1981) appeal denied 14 B.R. 307 (S.D.N.Y.1981); In re Pearl-Wick Corp., 15 B.R. 143 (Bankr.S.D.N.Y.1981) aff'd 26 B.R. 604 (S.D.N.Y.1982). The derivative proceeds are also property of the estate. Bradt v. Woodlawn Auto Workers F.C.U., 757 F.2d 512 (2d Cir.1985); In re Mego Intern. Inc., 28 B.R. 324, 10 B.C.D. 424 (Bankr.S.D.N.Y.1983). Accordingly, it has been held that such proceeds are subject to the turnover provisions of § 542 once the insurance company has recognized its duty to pay. In re Mills, 37 B.R. 832, 833 (Bankr.E.D.Tenn.1984). Here, the issue is whether a proceeding seeking insurance proceeds is a core proceeding where the insurer contests coverage and asserts that the notice condition to the policy has not been met.
With respect to an insurer's obligation to pay insurance proceeds, the debt is matured upon the occurrence of the loss. Cerullo v. Aetna Casualty & Surety Co., 41 A.D.2d 1, 3, 341 N.Y.S.2d 767, 769, (4th Dep't 1973); Beck-Brown Realty Co. v. Liberty Bell Ins. Co., 137 Misc. 263, 264, 241 N.Y.S. 727, 728 (1930). Although the obligation to pay is conditioned upon timely provision of a written proof of loss, 5A Appleman, Insurance Law and Practice § 3481 (1981) such a condition is akin to the demand and presentment conditions applicable to causes of action based on negotiable instruments, see N.Y. Uniform Commercial Code § 3-501 (McKinney's 1984) which clearly falls within the definition of turnover proceedings. Cf. In re Welch, 29 B.R. 819 (Bankr.M.D.Tenn.1982).
Once a sworn proof of loss statement is submitted, the insurance company can assert, as it has done here, a defense of non-coverage. Such a defense, however, like forgery and other defenses to a check, see N.Y. Uniform Commercial Code § 3-401 (McKinney's 1984) does not affect the demand character of the debt. Cf. Kronfeld v. Fidelity, 53 A.D.2d 190, 385 N.Y.S.2d 552, 555, 194 (1st Dep't, 1976); appeal denied, 40 N.Y.2d 807, 391 N.Y.S.2d 1025, 359 N.E.2d 1002 (1976); 5A Appleman, Insurance Law and Practice § 3462 (1981). Thus, an action on an insurance policy either is, or bears a strong similarity to, a turnover proceeding which Congress has expressly included in its open-ended definition of core proceedings.
III
Even were an action to recover insurance proceeds not to be strictly construed as a turnover proceeding, there is a significant nexus between such proceedings and bankruptcy considerations which, in light of the similarity, strongly justifies treatment of such actions as core proceedings. In light of the plurality decision in Marathon, the vesting of original jurisdiction in the district courts through the amendment to 28 U.S.C. § 1334 by P.L. 98-353 (1984) and the control by district courts over cases and proceedings referred to the bankruptcy courts
[t]he issue of constitutional constraint on the ability of an adjunct bankruptcy court to issue final orders . . . requires consideration of the nexus between the purposes sought to be achieved through exercise of Article I power and the matter over which the court is asked to act.
In re Lion Capital Group, 46 B.R. 850, 12 B.C.D. 840, 844, 12 C.B.C.2d 59 (Bankr.S.D. N.Y.1985).
Recovery on insurance policies that nearly all debtors possess when entering bankruptcy are generally essential to achievement of the overall purposes of the bankruptcy court system and the Code: quick and equitable marshalling of the estate's assets, speedy liquidation and payment of creditors' claims or rehabilitating the debtor. Claims which can be quickly adjudicated and are not fraught with the potentially aggravated litigation of the fraud, contract and warrant claims presented in Marathon can be more speedily resolved by the bankruptcy court. Lion Capital, 46 B.R. at 860, 12 B.C.D. at 846, 12 C.D.B.2d at 69-70. The bankruptcy court's Article I purpose is to get the creditors paid and move the debtor quickly through liquidation or reorganization. In re Grayson-Robinson Stores, Inc., 320 F.2d 940, 949 *552 (2nd Cir.1963). Collection of insurance proceeds like that of other matured debts which Congress intended the bankruptcy courts to hear and determine under § 157(b). An action on such collection should not be shunted off to crowded district court and state court calendars thereby frustrating these ends.
To this, defendant I.C.S.P. responds that an action under this policy should not be a core proceeding because the policy requires submission of a dispute as to the amount of recovery to arbitration. That argument, however, supports a determination to the contrary. Marathon is bottomed on the concern for delegation of justiciability to a Article I court. E.g., White Motor Corp. v. Citibank, N.A., 704 F.2d 254, 263-64, 10 B.C.D. 392, 401 (6th Cir.1983). P.L. 98-353 (July 10, 1984), in amending 28 U.S.C. § 1334 and in enacting 28 U.S.C. § 157 addressed and solved that concern in its vesting of original jurisdiction over bankruptcy proceedings in the district courts and granting to them considerable control of all matters referred to the bankruptcy courts. Lion Capital, 46 B.R. at 858, 859, 12 B.C.D. at 845, 12 C.B.C.2d at 67-69.
Where the parties have agreed to arbitration, there is even less concern over wholesale delegation of justiciability to an Article I court. Pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (1982) an arbitration award will stand unless procured by "undue means" or where there was prejudicial misbehavior or the arbitrators "exceeded their powers." 9 U.S.C. § 10. It could be corrected only where there was evident material miscalculation. This power is hardly a broad exercise of justiciability. Review of such awards is to be indulged only in the most extreme cases; the court's function in confirming or vacating an award is "severely restricted." Oinoussian S.S. Corp. of Panama v. Sabre Shipping Corp., 224 F. Supp. 807, 809 (N.Y., 1963). The Second Circuit has "consistently accorded the narrowest of reading to the Arbitration Act's authorization to vacate awards where the arbitrators exceeded their powers." Puerto Rico Maritime Shipping Authority v. Star Lines, Ltd., 496 F. Supp. 14, 15 (S.D.N.Y.1979). There is thus no such concern here. This adversary proceeding is a core proceeding under § 157(b).
IT IS SO ORDERED.
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50 B.R. 3 (1985)
In re Ronald W. MEYER, d/b/a McCormick Motor Aids and Gail I. Meyer, Debtors.
Bankruptcy No. 82-01569-BKC-TCB.
United States Bankruptcy Court, S.D. Florida.
March 4, 1985.
Angus J. Campbell, P.A., West Palm Beach, Fla., for debtors.
Irving E. Gennet, Boca Raton, Fla., Trustee.
Daniel L. Bakst, Johnson & Bakst, P.A., West Palm Beach, Fla., for Trustee.
*4 ORDER ON FEES
THOMAS C. BRITTON, Bankruptcy Judge.
At the final meeting of creditors held February 26, three fee applications were before the court: (1) the trustee, $158 (C.P. No. 89), (2) the trustee's attorney, $511 (C.P. No. 91) and (3) the debtor's attorney, $2,112 (C.P. No. 92). The estate totals only $1,099.
This case began two and one-half years ago in August, 1982 as a voluntary chapter 11 petition. The debtors were ordered to file a plan. They obtained an extension. The plan was filed on the last day, December 6, 1982. After nearly eight more months had elapsed, the debtors conceded that they could not fund the plan they had proposed and the case was converted to chapter 7 in July, 1983. (C.P. No. 46).
Of the total remaining estate, the trustee received only $18.67 from the debtors-in-possession. The remainder came from the collection of an account receivable and the sale of a vehicle.
I find the application of the trustee in the amount of $155.96, together with $2.08 in expenses, is reasonable and it is approved in that amount.
The application of the trustee's attorney seeks $500 for 8.25 hours services, including the collection of the account receivable ($780). The application is reasonable and is approved, together with the requested reimbursement for $11 expenses advanced.
The debtors' attorney prepared and submitted a plan, which the debtors were unable to perform. He performed no other significant service during the history of this case. His application fails to comply with the requirements of B.R. 2016(a) and for that reason it is denied.
The debtors' attorney acknowledged at the final meeting of creditors that he had received a total of $4,812 compensation in this case. When his employment was initially authorized by the court in August, 1982, he disclosed the payment of $2,245.38. (C.P. No. 7). He was required by B.R. 2016(a) to disclose all payments in his application for compensation:
"An application for compensation shall include a statement as to what payments have theretofore been made or promised to the applicant for services rendered or to be rendered in any capacity whatsoever in connection with the case, the source of the compensation so paid or promised, whether any compensation previously received has been shared and whether an agreement or understanding exists between the applicant and any other person for the sharing of compensation received or to be received. . . . "
If the compensation was received before the first meeting of creditors, counsel was required to disclose that compensation by filing a written report with the court before the first meeting of creditors. 11 U.S.C. § 329(a) and B.R. 2016(b). He disclosed less than half the amount ultimately received.
If, however, he received the balance after the first meeting of creditors, he did so in disregard of § 330(a) and § 331 which require a written application, notice to creditors, a hearing and a court order to authorize final payment and to authorize any interim compensation.
The obvious purpose of these requirements is to enable the creditors to review the debtor's transactions with his attorneys and to seek, if necessary, the return of excessive payments made by a desperate debtor to an attorney on the eve of bankruptcy. Section 329. By his conduct in this case, the debtors' attorney has almost frustrated any possibility of any such review. I am reasonably confident that counsel's failure to disclose the full extent of his compensation was the result of neglect rather than design, but the effect upon the administration of the case is precisely the same. I believe that under these circumstances, the pending fee application should be denied.
The trustee is directed on behalf of the creditors to review the debtors' transactions with their attorney and to request a hearing under § 329(b) if the compensation *5 already received by counsel appears to exceed the reasonable value of the services provided.
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47 N.J. 180 (1966)
219 A.2d 857
STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
BERNARD ROSENGARD, DEFENDANT-RESPONDENT.
The Supreme Court of New Jersey.
Argued January 11, 1966.
Decided May 23, 1966.
*181 Mr. Gregory J. Castano, Assistant Prosecutor, argued the cause for appellant (Messrs. James G. Lepis and John P. Keegan, on the brief; Mr. James A. Tumulty, Jr., Hudson County Prosecutor, attorney).
Mr. James F. McGovern, Jr., argued the cause for respondent.
The opinion of the court was delivered PER CURIAM.
The trial court dismissed nine indictments returned by a grand jury in Hudson County, 89 N.J. Super. 28 (Law Div. 1965), and we certified the State's appeals before argument in the Appellate Division.
The motion to dismiss was "on the ground that a conflict of interest has arisen between the duties of the Office of the City Clerk and that of the Hudson County Prosecutor, and that the City Clerk of the City of Jersey City is charged with responsibility for the acts which are the subject matter of said indictments." Defendant's supporting affidavit explained that the County Prosecutor, who had tenure in the office of City Clerk of Jersey City, was on leave of absence from that office at the time when defendant, his successor as City Clerk, allegedly committed the offenses charged. The offenses all relate to defendant's performance in that office. Defendant's affidavit also showed that just before defendant was named City Clerk the Prosecutor had attempted to designate another man to hold the office during his leave of absence, see R.S. 40:171-117, and further recited sundry incidents over a period of many years indicating the Prosecutor disliked him.
In dismissing the indictments, the trial court expressly said it did not "make any finding that the indictments were motivated by malice or ill will," but rather proceeded on the premise that "Where a prosecutor seeks to have indicted a holder of a public office and he himself is the holder of said public office on leave of absence, these facts in themselves show a prejudice, not as a matter of fact but as a matter of law, so that the prosecutor cannot personally act under such circumstances." 89 N.J. Super., at p. 36.
*182 The issue becomes clear if we sweep to one side the sundry allegations of personal ill will which were not tried and were not adjudged. What remains as the sole basis of the trial court's decision is the naked circumstance that defendant occupied a public office to which the County Prosecutor held title and which the County Prosecutor was free to reclaim without regard to the wishes or fate of the temporary incumbent. Upon that fact alone, it cannot be said that the County Prosecutor had a private interest in prosecuting the criminal charges. That circumstance alone did not demonstrate that the Prosecutor and his staff could not handle the matter with fairness and the appearance of fairness.
As we have said, the untried allegations of personal animosity tend to obscure the scene. Of course, charges of that kind cannot be resolved upon ex parte affidavits, State v. Manney, 24 N.J. 571, 577 (1957); State v. Sherry, 46 N.J. 172, 175 (1965), and the trial judge disavowed doing so. In any event, we are satisfied the several incidents charged in the affidavit, even if found to be true, would not suffice to nullify the actions of the grand jury.
The trial court felt it would be appropriate for the Attorney General to handle the prosecution. We agree that in the light of the post-indictment charges made by defendant, the Prosecutor might well request the Attorney General to take over the prosecution. Before the trial court and before us, the Prosecutor, while vigorously disputing the claim that any of the alleged facts impugned the validity of the indictments, offered to turn the indictments over to the Attorney General for prosecution. Cf. Earl v. Winne, 14 N.J. 119, 134 (1953). We assume that course will be followed.
The judgments are reversed and the indictments are reinstated.
For reversal Chief Justice WEINTRAUB and Justices JACOBS, FRANCIS, PROCTOR, HALL and SCHETTINO. 6.
For affirmance None.
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242 Md. 727 (1966)
219 A.2d 839
HOLOFCENER
v.
HOLOFCENER
[No. 364, September Term, 1965.]
Court of Appeals of Maryland.
Decided June 2, 1966.
The cause was argued before PRESCOTT, C.J., and HAMMOND, HORNEY, MARBURY and McWILLIAMS, JJ.
Alexander Stark for appellant.
Herbert Myerberg and Charles J. Harrison for appellee.
*728 PER CURIAM:
This is an appeal by Michael G. Holofcener from a decree of divorce a vinculo matrimonii awarded to his wife, Ruth G. Holofcener.
In July 1964 the wife filed a bill of complaint for divorce a mensa et thoro on the ground of constructive desertion. In October of the same year the parties signed a voluntary separation agreement which also covered property rights and child custody. Three months after the agreement was signed, the wife filed a petition for leave to file a supplemental bill of complaint in which she alleged adultery on the part of her husband. In her petition no mention was made of the separation agreement which had been entered into since the filing of the original bill of complaint. The order allowing her to file the supplemental bill was signed in due course. A hearing was held in open court in April 1965 and the chancellor found that the husband had been guilty of adultery since the filing of the original bill, and consequently granted an absolute divorce in the wife's favor.
The correctness of the chancellor's finding of adultery is not seriously challenged, but the appellant raises two legal questions: (1) While the parties were living separate and apart pursuant to the terms of a voluntary separation agreement, may one party to the agreement seek a divorce on the culpatory ground of adultery, if that adultery was committed and the divorce proceeding based thereon is concluded, prior to the expiration of the eighteen months period required to ripen the voluntary separation into a ground for absolute divorce; and (2) by not mentioning the intervening separation agreement did appellee's petition for leave to file a supplemental bill of complaint fail to disclose a material fact to the court.
In regard to the first question presented, the appellant's contentions are: (a) That by signing the separation agreement the wife purposefully lulled him into a "sense of security" so that evidence could be more readily procured against him; and (b) that the Legislature, by adding voluntary separation for a prescribed statutory period as a ground for absolute divorce (see Code (1957, 1965 Cum. Supp.), Article 16, Section 24, Clause 5) intended that this ground be used, if available, rather than *729 the culpatory ground of adultery. As to the first contention, paragraph 14 of the separation agreement specifically reserved the right of either of the parties "to assert as a ground for divorce any cause or ground which either of them may now or hereafter have against the other," and there is nothing otherwise contained in the agreement which would lead a signer to believe that it was intended to be a "license for licentiousness." The second contention is likewise devoid of merit. It is apparent from a reading of Article 16, Section 24, that the Legislature, by including voluntary separation as a fifth ground for an absolute divorce, did nothing more than create an independent cause of action, without disturbing or modifying in any way the existing third ground (adultery).[1] When the appellee filed her supplemental bill of complaint the voluntary separation had not yet ripened into a ground for divorce of any kind and the Legislature surely did not intend that an innocent spouse living apart by mutual consent must sit idly by and endure the shame of the other's adulterous conduct until such time as a nonculpatory ground for divorce matures. No support for the appellant's position is afforded by the two cases (Matysek v. Matysek, 212 Md. 44, 128 A.2d 627; Hughes v. Hughes, 216 Md. 374, 140 A.2d 649) cited in his brief. In those cases we merely held that adultery is not a recriminatory defense to a divorce action based on a voluntary separation which has endured for the statutory period. The rationale of those decisions does not control the question here presented.
From what we have said in regard to the first question, the answer to the second becomes apparent, i.e., that the existence of the intervening separation agreement was not a material fact of such a nature as had to be mentioned in the petition for leave to file a supplemental bill of complaint.
Decree affirmed. Appellant to pay the costs.
NOTES
[1] The initial recognition, in this State, of voluntary separation as a ground for divorce a vinculo matrimonii is found in Md. Acts 1937 Ch. 396 which amended Md. Code Art. 16, Sec. 38. The amendment required that the parties voluntarily live separate and apart for five years without reasonable expectation of reconciliation. See also Md. Code (1939) Art. 16, Sec. 40.
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153 Conn. 540 (1966)
STATE OF CONNECTICUT
v.
SAMUEL R. BELL
Supreme Court of Connecticut.
Argued March 2, 1966.
Decided April 5, 1966.
KING, C. J., MURPHY, ALCORN, HOUSE and COTTER, JS.
*541 Donald G. Walsh, special public defender, for the appellant (defendant).
David B. Salzman, assistant state's attorney, with whom, on the brief, were George R. Tiernan, state's attorney, and Richard P. Sperandeo, assistant state's attorney, for the appellee (state).
KING, C. J.
The defendant was convicted of common-law burglary under General Statutes § 53-68.[1] That statute does not create or define a crime but merely provides a penalty for the crime of common-law burglary. Rex v. Hanson, 1 Root 59; 21 Am. Jur. 2d, Criminal Law, § 13. In this appeal the defendant claims, inter alia, error in the court's charge to the jury as to the definition of "nighttime." Common-law burglary is the breaking and entering of the dwelling house of another in the night season with an intent to commit a felony therein. State v. Ward, 43 Conn. 489, 493; 2 Swift, Digest, p. 300; 2 Wharton, Criminal Law and Procedure (Anderson Ed.) § 406. The court charged the jury, in part, as follows: "[N]ighttime is when there is not sufficient daylight left to enable *542 one to discern the features of another. And along with that definition it is said by the Supreme Court that another accepted definition is that it is the time between sunset of one day and daylight of the next day". The defendant adequately excepted to this portion of the charge.
Common-law burglary is an offense against the habitation carried out when the occupants are expected to be asleep and, therefore, not alert to prevent the invasion of their dwelling. 4 Blackstone, Commentaries, p. 224. Therefore, "night season" was defined as that time when there is not enough daylight for one to discern the features of another. State v. Morris, 47 Conn. 179, 182; 2 Swift, Digest, p. 302; 2 Wharton, op. cit. § 431.
The second definition given by the court was apparently taken from our opinion in Gibson v. Hoppman, 108 Conn. 401, 406, 143 A. 635. We were there defining the word "night" as used in what is now § 19-346 of the General Statutes, which requires the owners of tenement houses to provide for the lighting of all public halls "at night." What we there said had no application to the definition of night as an element of common-law burglary. The charge was erroneous in defining the night season as the period between sunset and sunrise.
That this error in the charge was harmful is clear. First, it is common knowledge that, immediately after sunset, there is a period of twilight in which visibility, although diminishing, is not overcome by darkness to the extent that the features of another cannot be discerned. A similar period precedes sunrise. Thus, the court's charge led the jury to understand that there were two periods, of different lengths, either of which could be considered to be night, although one of them was inclusive of *543 the other. The jury could not have been other than confused by these inconsistent and conflicting definitions of this essential element in the crime charged. "A charge should not contain contradictory statements of the law". Bailey v. Bruneau's Truck Service, Inc., 149 Conn. 46, 57, 175 A.2d 372; Pratt, Read & Co. v. New York, N.H. & H.R. Co., 102 Conn. 735, 740, 130 A. 102.
Second, the materiality of the error is further apparent from the claims of proof, from which it appears that on April 2, 1964, the day of the alleged burglary, the Kellner house, which was in a rural area in Woodbridge, was locked and left temporarily unoccupied at 4:30 p.m. The sun set at 6:17 p.m. At approximately 7:30 p.m., Salvatore DeGennaro, a Woodbridge police sergeant, apprehended the defendant walking along the road with his companion, Louis Vena, about 100 feet from the Kellner house. Vena was afterwards found to have been carrying goods stolen from the Kellner dwelling and a briefcase containing burglars' tools. Later the Kellner residence was found to have been broken into. There is no dispute as to the times set forth above. The state has not claimed to have proven by direct evidence the time at which either the defendant or Vena entered or left the Kellner house but has relied, as is often necessary in burglary cases, upon the inferences which the jury might reasonably have drawn from the foregoing claims of proof as to the time at which entry was made. The time of the entry may be established by circumstantial evidence, the persuasive force of which depends upon all the facts and circumstances. State v. Leaden, 35 Conn. 515, 516.
In this case, about three hours elapsed between the time the house was left secure and the time the *544 defendant was apprehended. More than half of that time was before sunset, and there was an additional period of twilight during which a breaking and entering would not have constituted common-law burglary. On the other hand, the jury might fairly consider it unlikely that the defendant and Vena spent more time in the house than was reasonably required to locate and gather the goods later found on Vena and that the two did not loiter in the neighborhood after leaving the house. There had been darkness for nearly an hour prior to the apprehension of the defendant and Vena on the highway. We cannot say as a matter of law that the jury could not have found that the entry occurred at night under either definition thereof given by the trial court. But the charge must be considered from the standpoint of its effect on the jury in guiding them to a proper verdict. Fasanelli v. Terzo, 150 Conn. 349, 357, 189 A.2d 500. The jury may have inferred that the entry occurred after sundown but within the twilight period. Under the second definition of night in the charge this inference would have led the jury to a verdict of guilty. The giving of that incorrect definition clearly constituted a material and prejudicial error.
The other claims of error pursued in the defendant's brief either were not properly raised or, because of the necessity for a new trial, do not require discussion.
There is error, the judgment is set aside and a new trial is ordered.
In this opinion the other judges concurred.
NOTES
[1] The defendant was not charged with any of the statutory modifications of common-law burglary embraced in General Statutes §§ 53-73, 53-75, or 53-76.
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679 F. Supp. 881 (1988)
LAKEFIELD TELEPHONE COMPANY, Plaintiff,
v.
NORTHERN TELECOM INC., Defendant.
No. 86-C-619.
United States District Court, E.D. Wisconsin.
February 2, 1988.
John W. Markson, Bell, Metzner & Gierhart, Madison, Wis., for plaintiff.
Terry E. Nilles, Gibbs, Roper, Loots & Williams, Milwaukee, Wis., for defendant.
DECISION AND ORDER
WARREN, Chief Judge.
Presently pending before the Court in the above named case is the election of remedies issue raised by the Court at the final pretrial conference. Both parties have submitted written briefs on the issue, which have been reviewed by the Court. The complaint in this case was filed May 2, 1986, in the Circuit Court for Manitowoc, Wisconsin. The case was removed by Northern Telecom to this Court on June 12, 1986, pursuant to 28 U.S.C. § 1446. The complaint of Lakefield alleged that Northern Telecom unlawfully terminated Lakefield's dealership in violation of the Wisconsin Fair Dealership Law, Wis.Stat. § 135.01, et seq. Lakefield Telephone sought both injunctive and monetary relief. On July 28, 1986, Lakefield's request for a temporary restraining order was denied. On February 18, 1987, however, Lakefield's motion for a preliminary injunction was granted. Thus, at trial, if the jury finds liability under the Wisconsin Fair Dealership Law, one issue that will need to be resolved is the amount of damages between the date of termination and the date of the preliminary injunction.
The issue giving rise to the election of remedies issue also involves damages. Lakefield seeks a permanent injunction and monetary damages. Both parties recognize the inherent inconsistency in these two remedies. By its definition, an injunction requires a finding that damages cannot be measured and are therefore irreparable. See O.M. Droney Beverage Co. v. Miller Brewing Co., 365 F. Supp. 1067, 1068-69 *882 (D.Minn.1973). Because of this conflict, Northern Telecom seeks to have Lakefield elect its remedy prior to trial. In response, Lakefield suggests a bifurcated trial: the first part dealing with liability, past damages and the injunction; and the second, if necessary, dealing with future damages. Northern Telecom cites to Wisconsin case law for support for its position; Lakefield cites to federal case law in support of its position. Both parties cite to the Seventh Circuit case of Roberts v. Sears, Roebuck & Co. for further support of their positions.
Reliance on the same lawsuit by both parties is not surprising in light of the language in two of the multiple decisions issued on that case. One Roberts decision, 573 F.2d 976, 984 (1978), holds in part that federal courts are not bound by state law on the election of remedies doctrine.[1] A second decision, an appeal from the remand ordered in the first decision, states in part: "In the earlier opinion, we accepted Illinois law as to election of remedies for past damages or profits, as had the district court immediately after the jury verdict. We parted with Illinois law only to give the plaintiff an opportunity to protect himself against future damages." 617 F.2d 460, 464 (1980).[2] From these two decisions it appears the Court of Appeals has given no clear indication on whether state or federal law should control the election of remedies issue.
If this Court were to turn to Wisconsin law, it would apply the case of Wills v. Regan, 58 Wis. 2d 328, 345, 206 N.W.2d 398 (1973), which held that a court, in its discretion, may order an election of remedies where a plaintiff's two theories of relief are premised on the same identical acts of a defendant. The Court also would apply 5-M Ltd. v. Dede, 86 Wis. 2d 287, 289, 272 N.W.2d 110 (1978), which holds that the election of remedies doctrine arises when remedies proceed from opposite and irreconcilable claims of right.
If the Court were to turn to federal law, the strongest support against a pre-trial election of remedies comes from the Eighth Circuit cases of Grogan v. Garner, 806 F.2d 829 (8th Cir.1986), and In Re King Enterprises, 678 F.2d 73 (8th Cir.1982). Those two cases point to Rule 8 of the Federal Rules of Civil Procedure as support for the position that a party may present different theories of recovery to a jury.[3]
Other federal courts, though, have applied state law to an election of remedies issue. See, for example, Prudential Oil Corporation v. Phillips Petroleum, 418 F. Supp. 254, 257 (1975) (applying New York law to election of remedies issue; cited by court in Roberts I, 573 F.2d at 985).
The above analysis demonstrates the importance of the choice of law in resolving the election of remedies issue. On that issue the Court returns to the two Roberts decisions cited above. After concluding in Roberts I that federal courts are not bound by the Illinois election of remedies doctrine, the court stated:
The choice of law issue in diversity cases, where no Federal Rule of Civil Procedure clearly controls, is governed by the Rules of Decision Act, 28 U.S.C. § 1652. See generally Redish & Phillips, Erie and the Rules of Decision Act: In Search of the Appropriate Dilemma, 91 Harv.L.Rev. 356, 357-58 (1977); Ely, The Irrepressible Myth of Erie, 87 Harv. L. Rev. 693, 697-700 (1974). In interpreting that Act, at least one circuit has recognized that where a state procedural rule is derived from a judicial system that is fundamentally inconsistent with the federal judicial system, then the state rule need not be slavishly adhered to by a federal district court. Atkins v. Schmutz Mfg. Co., 435 F.2d 527 (4th Cir.1970), cert. denied, 402 U.S. 932, 91 S. Ct. 1526, 28 L. Ed. 2d 867 (1971). See also Redish & Phillips, supra at 391 n. 189.
*883 Under the Illinois cases cited by Sears, a plaintiff had to elect his remedies at the time of filing suit because Illinois had retained separate courts of equity and courts of law. See, e.g., Carr v. Arnold, 239 Ill. 37, 87 N.E. 870 (1909). In federal courts, however, the distinction between law and equity has long been abolished. Fed.R.Civ.P. 2. It would be anomalous to follow a state rule created under a judicial system so at odds with that of the federal system. In fact, it might be argued that such a holding would violate Rule 2, in which case state law, of course, would be disregarded. See Hanna v. Plumer, 380 U.S. 460, 469-74, 85 S. Ct. 1136 [1142-46], 14 L. Ed. 2d 8 (1965). We, therefore, feel no compunction in declining to follow Illinois law on this issue.
Having determined that the district court is not bound by the rigid requirements of Illinois law on election of remedies, there remains the question whether plaintiff can still pursue his equitable remedies under the facts of this case. We conclude that this district court correctly decided not to disturb the jury's monetary award, but that the court erred in not considering whether rescission of the contract and return of plaintiff's patent were appropriate.
The general rule as to when an election is necessary is that "`a certain state of facts relied on as the basis of a certain remedy is inconsistent with, and repugnant to, another certain state of facts relied on as the basis of another remedy.'" Prudential Oil Corp. v. Phillips Petroleum Co., 418 F. Supp. 254, 257 (S.D.N.Y.1975).
573 F.2d at 984-985 (footnotes omitted).[4]
This language leads this Court to the conclusion that the Court of Appeals would have applied Illinois law had it not been so much at odds with the federal system and the "general rule." This conclusion is consistent with the language of Roberts II, wherein the court states it accepted Illinois law on the election of remedies issue for past damages and profits, but "parted with Illinois law" on future damages since the law required an election at the time of the filing of the suit. 617 F.2d at 464. The court also stated that it "appeared clear under general law and under Illinois law as well" that a person suing for fraud may seek damages for tort or may waive the tort and make an election to seek restitution in quasi contract or equitable restitution." Id.
Furthermore, this Court concludes that it should be guided by Wisconsin law on the election of remedies. Unlike Illinois law, Wisconsin law gives the trial court the discretion to order an election. Wills v. Regan, 58 Wis.2d at 328, 206 N.W.2d 398. That election may be ordered prior to the start of trial or after the close of the plaintiff's case. Id. Also, the Wisconsin Supreme Court has indicated that it does not favor a broad application of the doctrine. 5-M Ltd. v. Dede, 86 Wis. 2d 287, 289, 272 N.W.2d 110 (App.1978) (citing Bank of Commerce v. Paine, Webber, Jackson & Curtis, 39 Wis. 2d 30, 40, 158 N.W.2d 350 (1968)). Finally, were Rule 8(e) to control the election of remedies at trial, this Court is persuaded that the Seventh Circuit Court of Appeals would have raised that point in Roberts I as it did with its discussion on Rule 2.
Applying Wisconsin law to the case at hand, the Court holds that plaintiff must make an election prior to the start of trial. In order to seek injunctive relief, a plaintiff needs to show that the remedy at law in the form of an award of damages would be inadequate. In order to oppose this relief, a defendant logically would argue that the remedy at law the money damages would be adequate. But if a plaintiff were allowed to seek future damages at the same time, a defendant would have to present self-defeating defenses: The more the defendant demonstrates an adequate *884 remedy at law, the more he undermines the fight against future damages; the more the defendant fights the award of future damages, the more he undermines the fight against a permanent injunction. Fundamental fairness as well as logic dictates that a defendant should not have to present his case in this manner.
In summary, the Roberts I decision leads the Court to follow Wisconsin law when considering an election of remedy issue. Wisconsin law gives a trial court the discretion to order an election of inconsistent remedies prior to the start of trial. In the case at hand, where Lakefield seeks the inherently inconsistent remedies of injunctive relief and monetary damages, the Court will exercise its discretion and order an election prior to the start of trial.
NOTES
[1] Hereinafter referred to as Roberts I.
[2] Hereinafter referred to as Roberts II.
[3] Rule 8(e) allows a party to plead relief in the alternative.
[4] 28 U.S.C. § 1652 provides:
The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the Courts of the United States, in cases where they apply.
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50 B.R. 119 (1985)
In re James Ray ENNIS, Doris Maria Ennis, Debtors.
In re Mary F. MARSHALL, Debtor.
In re David Lee WHITEHEAD, Debtor.
Bankruptcy Nos. LV-84-9555, LV-82-1277 and LV-80-1057.
United States Bankruptcy Court, D. Nevada.
June 3, 1985.
*120 James Ray Ennis, Doris Maria Ennis, Mary F. Marshall and David Lee Whitehead, in pro. per.
R. Vaughn Gourley, Brown, Wells, Beller & Kravitz, Las Vegas, Nev., for Credit Bureau of Southern Nevada.
MEMORANDUM DECISION
ROBERT CLIVE JONES, Bankruptcy Judge.
Each of these movants seek an order compelling the Credit Bureau of Southern Nevada (Credit Bureau) to delete all record of the respective movant's bankruptcy case from the Credit Bureau's files. The Court must determine whether it has jurisdiction to issue an order or injunction against a non-creditor third party after each of the respective bankruptcy cases have been dismissed and/or closed.
Movant David Lee Whitehead filed a voluntary Chapter 7 petition on November 5, 1980. Thereafter, the Credit Bureau noted the debtor's bankruptcy case on its consumer credit report. Mr. Whitehead received a discharge on January 13, 1982, and his bankruptcy case was closed on March 12, 1982.
On July 24, 1984, the movant filed a motion to reopen his bankruptcy case in order to have it dismissed. However, the motion to reopen has never been brought on for hearing, and this case has not been reopened.
On August 23, 1984, Mr. Whitehead filed his motion for an order compelling the Credit Bureau to delete all record of his bankruptcy case from the Credit Bureau's records. This motion was heard on December 17, 1984.
Movant Mary F. Marshall filed a voluntary Chapter 7 petition on September 24, 1982. Thereafter, the Credit Bureau noted the debtor's bankruptcy case on its consumer credit report. The Marshall case was dismissed for failure to pay filing fees on November 16, 1983, and was closed on November 30, 1983.
On August 23, 1984, Ms. Marshall filed her motion for an order compelling the Credit Bureau to delete all record of her bankruptcy case from the Credit Bureau's records. This motion was also heard on December 17, 1984. This case not has been reopened, nor has a motion to reopen been filed with this Court.
Movants James R. Ennis and Doris M. Ennis filed their voluntary Chapter 7 petition on April 27, 1984. Thereafter, the Credit Bureau noted the debtors' bankruptcy case on its consumer credit report. The debtors later moved to dismiss the case, and an order of dismissal was entered by the Court on August 10, 1984.
On August 23, 1984, the movants filed their motion for an order compelling the Credit Bureau to delete all record of their bankruptcy case from the Credit Bureau's records. The Ennis case was closed on September 27, 1984 and this motion was heard on December 17, 1984. This case has not been reopened, nor has a motion to reopen been filed with this Court.
Each movant contends that the credit record reference to their respective bankruptcy case is obsolete because the case has been dismissed and/or closed. The reporting of obsolete consumer credit information is prohibited by federal law. 15 U.S.C. § 1681c. The movants contend that an injunction compelling removal of the obsolete information is appropriate.
The major question raised by these motions is whether this Court has jurisdiction to issue the requested injunctions. For the reasons stated below, the Court concludes that it does not have jurisdiction over these matters.
It is well settled that a bankruptcy court has power to determine whether it has jurisdiction to proceed in any action. See United States v. United Mine Workers, 330 U.S. 258, 289-92, 67 S. Ct. 677, 693-695, 91 L. Ed. 884 (1947); Matter of Visioneering Const., 661 F.2d 119, 122 (9th *121 Cir.1981); In re Youngstown Steel Tank Co., 27 B.R. 596, 598 (W.D.Pa.1983); Matter of Yale Express Systems, Inc., 11 B.R. 495, 500 (Bankr.S.D.N.Y.1981).
The bankruptcy court possesses only the jurisdiction and powers expressly or by necessity granted by Congress. Johnson v. First Nat. Bank of Montevideo, Minn., 719 F.2d 270, 273 (8th Cir.1983), cert. denied, ___ U.S. ___, 104 S. Ct. 1015, 79 L. Ed. 2d 245 (1984); In re Trigg, 630 F.2d 1370, 1372 (10th Cir.1980).
Congress has granted the United States district courts original and exclusive jurisdiction of all bankruptcy cases. 28 U.S.C. § 1334(a). The district court in which the bankruptcy case is filed has exclusive jurisdiction over all of the property of the debtor and over all property of the estate, wherever located, as of the commencement of the case. 28 U.S.C. § 1334(d).
The district court has original but not exclusive jurisdiction of all civil proceedings in the bankruptcy case. 28 U.S.C. § 1334(b). The district court may refer any or all bankruptcy cases or proceedings to the bankruptcy judge. 28 U.S.C. § 157(a).
This Court recognizes that the bankruptcy courts' jurisdiction under the Bankruptcy Code may be broader than under the old Bankruptcy Act. It is clear, however, that the bankruptcy court is not a court of general jurisdiction where any matter somehow involving a debtor, or a former debtor, may be heard. A bankruptcy court should not assume jurisdiction over a matter that does not involve the administration of, or property of a bankruptcy estate. In re Continental Airlines Corp., 40 B.R. 299, 303 (Bankr.S.D.Tex. 1984); In re Palmer Const. Co., 7 B.R. 232, 233 (Bankr.D.S.D.1980).
In order for a bankruptcy judge to exercise jurisdiction over a proceeding involving a non-creditor third party, there must be a substantial relationship between the matter in controversy and the bankruptcy case. Turner v. Ermiger, 724 F.2d 338, 339 (2nd Cir.1983); In re Sewanee Land, Coal and Cattle Co., 34 B.R. 696, 700 (N.D.Ala.1983); In re Otero Mills, Inc., 25 B.R. 1018, 1021 (D.N.M.1982). The bankruptcy court does not have jurisdiction over a proceeding that does not relate to or affect the administration of the bankruptcy estate. In re Sewanee Land, Coal and Cattle, Inc., 34 B.R. at 700; In re Osage Exploration Co., 39 B.R. 966, 968 (Bankr. S.D.N.Y.1984); In re Curtina International, 15 B.R. 993, 995 (Bankr.S.D.N.Y. 1981).
If injunctive relief is sought against a non-creditor third party, the bankruptcy court should assume jurisdiction only if the failure to do so would threaten the bankruptcy estate's assets. See S.E.C. v. First Financial Group of Texas, 645 F.2d 429, 440 (5th Cir.1981); Matter of Shippers Interstate Service, Inc., 618 F.2d 9, 13 (7th Cir.1980); In re Bel Air Chateau Hospital, Inc., 611 F.2d 1248, 1251 (9th Cir.1979); In re Brada Miller Freight Systems, Inc., 16 B.R. 1002, 1013 (N.D.Ala.1981); In re United Dept. Stores, Inc., 39 B.R. 54, 55 (Bankr.S.D.N.Y.1984).
Thus, this Court's jurisdiction to issue an injunction against the Credit Bureau is predicated upon the relationship between the administration of the movant's bankruptcy case, or property of the bankruptcy estate, and the conduct to be enjoined. This Court may assume jurisdiction to issue an injunction against the Credit Bureau only if the failure to do so will threaten the assets of a bankruptcy estate. In these instances, the movants' Chapter 7 bankruptcy cases have been dismissed and/or closed.
The dismissal of a voluntary Chapter 7 case revests the property of the bankruptcy estate in the entity in which the property was vested prior to the commencement of the case. 11 U.S.C. § 349(b)(3). The purpose of § 349(b) is to "undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case". B.R.Rep. No. 95-595, 95th Cong., 1st Sess. 337-38 (1977); S.Rep. *122 No. 95-989, 95th Cong., 2d Sess. 48-49 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5834-35, 6293-94; In re Weathersfield Farms, Inc., 34 B.R. 435, 439 (Bankr.D.Vt.1983).
In the Marshall and Ennis instances, the movants' bankruptcy cases have been dismissed and closed. The property of the respective estates has revested in the entities in which the property was vested when the cases were commenced.
In the Whitehead case, the bankruptcy case has been closed and has not been reopened. The Court notes that the movant has filed a motion to reopen in order to have the case dismissed. That motion, however, has never been brought on for hearing before this Court, and the case remains closed.
The former debtors' bankruptcy estates no longer exist. This Court has no jurisdiction to grant the requested injunction because this matter in no way relates to or affects any pending bankruptcy case, nor will the failure to do so threaten the property of any bankruptcy estate.
The Court also notes that the proper procedure for requesting injunctive relief is by an adversary proceeding, not by motion. Bankruptcy Rule 7001(8); Matter of Aerodex, Inc., 2 B.R. 49, 50 (Bankr.S.D.Fla. 1979).
For the reasons above stated, these motions to compel the Credit Bureau of Southern Nevada to delete all record of the respective movant's bankruptcy case from the Credit Bureau's files are denied.
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679 F. Supp. 641 (1987)
UNITED STATES of America, Plaintiff,
v.
PALMER-SMITH COMPANY, Defendant.
Civ. A. No. 84-CV-73718-DT.
United States District Court, E.D. Michigan, S.D.
May 29, 1987.
*642 Carolyn Bell Harbin, Detroit, Mich., R. Todd Luoma, Washington, D.C., for plaintiff.
Raymond J. Sterling, Andrew A. Paterson, Burke T. Lewis, Troy, Mich., for defendant.
MEMORANDUM OPINION AND ORDER
JULIAN ABELE COOK, Jr., District Judge.
On August 9, 1984, the United States brought suit against the Defendant, Palmer-Smith Company, for its failure to honor an Internal Revenue Service levy. In August of 1986, the Court allowed the Government to amend its Complaint and add a second cause of action (to wit, foreclosure of federal tax liens).
The issues were joined on September 23, 1986 when Palmer-Smith filed its answer. Shortly thereafter, both parties filed motions for summary judgment. Oral arguments were conducted on April 3, 1987. The motion was taken under advisement because of the need for additional briefing. The matter is now before this Court for resolution.
I
Palmer-Smith is a Melvindale, Michigan general contract company which works within the commercial, industrial, and institutional construction industry. Kropf Mechanical Contractors, Inc. was utilized by Palmer-Smith as a subcontractor to perform mechanical work at the Epcot Center in Lake Buena Vista, Florida.
Palmer-Smith and Kropf entered into two subcontracts[1] for mechanical work. During the existence of the two subcontracts, the Secretary of the Treasury made assessments against Kropf for unpaid withheld income and Federal Insurance Contributions Act (FICA) taxes which totalled $2,379,787.58.[2] From 1982 to 1983, the *643 Government filed a series of notices of federal tax lien regarding these liabilities.
Subsequent to the completion of the work on subcontract 8105-13, Palmer-Smith terminated the mechanical work on subcontract 8107-18 on March 9, 1983. Palmer-Smith did so because it concluded that Kropf could not, and did not, fully perform its contractual obligation under this second subcontract. Palmer-Smith justified its decision on the basis of a provision within the second subcontract which allowed for the termination of the agreement at any time when Palmer-Smith believed that Kropf could not complete its obligations under Article 6 of the General Terms and Conditions of Subcontract 8107-18.[3]
In defense against the claims of the Government, Palmer-Smith asserts that Kropf's failure caused it to hire other subcontractors to do the same work which resulted in an economic loss of $624,085. In an effort to recover a portion of its loss on the second subcontract, Palmer-Smith set off the sum of $95,850 against the balance due Kropf under the first subcontract 8105-13 on March 12, 1983. This *644 setoff was explicitly executed pursuant to Article 3, Paragraph E of the General Terms and Conditions of Subcontract 8105-13.
On March 16, 1983, the Internal Revenue Service (IRS) served a notice of levy on Palmer-Smith with respect to the federal tax liabilities of Kropf. Approximately two weeks later (March 30, 1983), the IRS served a final demand on Palmer-Smith regarding the notice of levy.
II
The principal statutory provisions in this cause are 26 U.S.C. §§ 6321 and 6322. 26 U.S.C. § 6321 essentially provides that if a taxpayer neglects or refuses to pay a tax after a demand has been made upon him, the amount "shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person."[4] 26 U.S.C. § 6322 simply determines that a lien, which was imposed under 26 U.S.C. § 6321, arises at the time when the assessment is made.
The central question in this case is whether Palmer-Smith possessed any property in which Kropf had a right. According to the Sixth Circuit Court of Appeals, in United States v. Bank of Celina, 721 F.2d 163, 169 (6th Cir.1983), "state law controls the issue of whether property exists to which a tax lien may attach in the first instance." Kropf's right to payment (if any) is based upon its contractual relationship with Palmer-Smith. Thus, state contract law principles are determinative of any of Kropf's possible property rights that it may have possessed in the contested funds. The Government bears the burden of showing that Palmer-Smith had possession of the property of Kropf. Hall v. United States, 258 F. Supp. 173, 174 (D.Miss.1966).
Two provisions of the first subcontract (8105-13) are particularly important to the parties. Article 3(c) of the Subcontract General Terms and Conditions specifies:
(c) The final balance due the Subcontractor shall be payable thirty days, or such other period specified in the [contract documents,] after completion and acceptance of all the work required by the [contract documents] and of approval of the final estimate and receipt of final payment from the Owner; provided, however, that such final balance shall not be paid in any event until the Subcontractor has proved to the satisfaction of the Company that all labor, materials, equipment and services or any other obligation for which he is responsible, used in performance of or connected with this Subcontract, have been paid for in full, that there are no liens or claims, present or contingent, against the work, the Company or the Owner; and that the work has received the approval of the Architect Engineer and the Owner; provided, further that the final balance due shall be reduced by the amount of any backcharges or other amounts withheld under any provision of this Subcontract; provided, further, that in the event the Subcontractor shall engage in any bankruptcy, insolvency, or arrangement proceeding, voluntary or involuntary, the Company may withhold the final balance, or any other payments, until expiration of the period of any guarantees required of the Subcontractor and Company may use and apply out of such final balance the amount necessary to satisfy any claims or costs arising out of such guarantees. The Subcontractor shall have no property interest in, or right to, such payment, nor any other payment hereunder until received by him.
(Emphasis added). On its face, this last sentence, which has been underlined, appears to indicate that Kropf had no claim to the monies that are held by Palmer-Smith.
*645 Article 3(e) of Subcontract 8105-13 reads:
(e) The Company may withhold any or all amounts otherwise due under this Subcontract at any time the Company shall deem it necessary to protect itself against claims, damages, losses or expenses from any of the following causes defective work not remedied: claims filed, or reasonable anticipated, against the Company, the Owner or the real estate and/or improvements involved in the work, failure by the Subcontractor to promptly pay without reasonable justification the labor, material, equipment, services and subcontractors used in the performance of the work; reasonable doubt that the work can be completed for the unpaid balance of the contract sum, or within the period called for by any schedule of progress; failure to perform the work in strict compliance with the Subcontract in a manner acceptable to the Architect/Engineer, the Owner and the Company, damages to, or claims by or against the Company (whether presently determined or reasonably anticipated) in any way arising out of this or any other Subcontract agreement between the company and the Subcontractor, or out of any act or omission by the Subcontractor causing damage to the Company, and the Company may apply any such amounts so withheld to the satisfaction of any such claims, damages, losses or expenses, and any such amounts so applied shall be deemed payments made on the contract price, and, provided, further, that Subcontractor shall have no property interest in, or right to, such amounts so withheld.
(Emphasis added). The affidavit of Robert Birdsall, controller of Palmer-Smith, indicates that the $95,850.00 at issue was withheld pursuant to this subcontract provision shortly after Kropf's mechanical work activity had been terminated.
In its Motion for Summary Judgment, Palmer-Smith initially argues that the primary rule of construction under Michigan contract law is to determine the intent of the contracting parties. Amoco Oil Company v. Kraft, 89 Mich.App. 270, 273, 280 N.W.2d 505 (1979). Clear and unambiguous language should be given its plain meaning. Geerdes v. St. Paul Insurance Co., 128 Mich.App. 730, 733-34, 341 N.W.2d 195 (1983). Palmer-Smith asserts that an application of these rules to the subcontracts shows that Kropf never had a property interest in the amount withheld.
Moreover, Palmer-Smith notes that Article 3(e) within the two subcontracts provide that the "Subcontractor shall have no property interest in, or right to, such amounts so withheld." Palmer-Smith also relies upon Article 3(c) within the two subcontracts which read:
The Subcontractor shall have no property interest in, or right to, such payment, nor any other payment hereunder until received by him.
Palmer-Smith next argues that when the Government has a federal tax lien, it is deemed to stand in the taxpayer's shoes and can only recover what the taxpayer could get in a direct action against Palmer-Smith. United States v. Varani, 780 F.2d 1296, 1304 (6th Cir.1986). Palmer-Smith then concludes:
If Kropf sued Defendant to recover the withheld $95,850.00 on subcontract 8105-13, under Michigan contract law, Defendant would first be entitled to deduct its entire $624,085.00 loss from subcontract 8107-18. Since the loss on subcontract 8107-18 greatly exceeded the withheld amount on subcontract 8105-13, Kropf would recover zero in a direct action. In short, under Michigan contract law, Defendant did not hold any of Kropf's property or rights to property subject to attachment.
Defendant's Brief at 5-6.
In their Supplemental Brief, Defendant asserts that this case is virtually identical to Atlantic Refining Co. v. Continental Casualty Co., 183 F. Supp. 478 (W.D.Pa. 1960), where the court sought to determine whether a construction contractor had a property interest in "retainage" that had been held by a building owner pursuant to a construction contract. The court held that the contractor, who (a) failed to pay *646 the laborers, (b) breached his contractual obligations to the owner, and (c) authorized the owner to withhold the consideration, was without any right to the money that had been retained and withheld by the treasurer. Since the court concluded that the contractor had no property right to those monies which had been withheld by the owner, it was determined that the Government lien never attached on the owner.
Although there are similarities between Atlantic Refining and the instant cause, there are significant dissimilarities. Here, there is evidence to suggest that (1) Kropf fully performed all of its obligations under the first subcontract, and (2) the monies, which were ostensibly earned by Kropf under the first subcontract, were retained by Palmer-Smith to pay for those damages which arose from the breach of the second subcontract. The Government asserts that Palmer-Smith has created a situation whereby it is simply using a sophisticated "collection device" to set off the debt on the second subcontract against the monies owed to Kropf under the first subcontract. Thus, according to the Government, its lien follows along with any transfers of Kropf's property. United States v. Bank of Celina, 721 F.2d 163, 169 (6th Cir.1983). Moreover, the Government argues that Article 3(c) does not mean what it says, in that a literal interpretation of the provision would render the contract without consideration because Kropf could never enforce its right to be paid. Even assuming that the Government is correct in asserting that the last sentence of Article 3(c) must essentially be nullified, this Court believes that the Government's liens did not attach.[5]
The Government submits that the controlling contact provision is actually Paragraph 4 of the contract which says that Palmer-Smith:
agrees to pay subcontractor (the taxpayer) for the satisfactory performance of this subcontract the firm lump sum amount of: ONE MILLION, THREE HUNDRED EIGHTY THOUSAND AND 00/100 DOLLARS subject to written authorized additions or deductions from such amount.
The Government says this provision makes clear that Kropf had a property interest in the funds from the first subcontract on the basis of its satisfactory performance of that subcontract.
Notwithstanding this contention, Paragraph 4 of the subcontract does not simply say that Kropf is entitled to this money upon satisfactory performance. It says that payment is "subject to written authorized additions or deductions from such amount." Palmer-Smith's Exhibit D consists of the written change in Kropf's subcontract which embodies the deduction of the $95,850. Thus, the key paragraph, which has been relied upon by the Government, actually makes clear that Kropf had no right to the contested money until such deductions or additions were made.
The Government asserts that Exhibit D is not a proper authorization form because it was unsigned by Kropf. Although the Government is correct in noting that the authorization form was not signed by Kropf, there is no evidence of any requirement that Kropf approved the withholding of the funds. In fact, the withholding was done pursuant to Article 3(e) which specifically says that "[t]he Company may withhold ..." and makes no mention of a requirement that Kropf must execute the document (i.e., authorization form). It would be anomolous if a clause, which was designed for Palmer-Smith's protection *647 from potentially detrimental actions of Kropf, was dependent on Kropf's approval. In addition, the Government has no standing to object to the method of withholding since it was not a party to the contract.
Assuming that Kropf did satisfactorily perform its obligation under the first subcontract,[6] and ignoring Article 3(c), the provision which has been relied upon by the Government makes clear that any right to payment of Kropf is conditional or "subject to" other deductions. At best, Kropf had a potential right to payment at a later date after all of the proper and necessary deductions under Article 3(e) were made. Since Kropf had no property interest, the Government has no lien at the present time. Paragraph 4 is also significant because it shows that Kropf did not even have a property interest before Palmer-Smith formally withheld the money.
Although the contract clauses at issue here are not a part of a typical agreement, they still allow money to be retained by Palmer-Smith for certain purposes. There is no reason why the money, which has been retained pursuant to one subcontract, cannot be set off against debts of another subcontract when there is a contractual provision allowing such an action. Thus, this is not simply a kind of set off for collection purposes, as alleged by the Government. Instead, Palmer-Smith never owed the money to Kropf because its contract clearly allowed it to deduct the funds from the first subcontract.
In United States v. Bess, 357 U.S. 51, 78 S. Ct. 1054, 2 L. Ed. 2d 1135 (1958), Justice Brennan said of a federal tax lien that:
It would be anomolous to view as "property" subject to lien proceeds never within the insured's reach to enjoy ...
Id. at 55-56, 78 S.Ct. at 1057-58. He, therefore, concluded that the Government had no right to those insurance proceeds which could not have been obtained until the beneficiary's death. Here, the Government seeks funds that were never within Kropf's reach because they were always "subject to" reasonable deductions.
Palmer-Smith is correct when it asserts that this case is similar to Pittsburgh National Bank v. United States, 657 F.2d 36 (3d Cir.1981), in which the court held that a government lien did not attach when the bank exercised its set off right prior to the placement of the lien. This case is even stronger than Pittsburgh, in which the depositor had some right to control the funds prior to the set off. Here, Paragraph 4 and other provisions within the subcontracts make clear that Kropf was never entitled to control this balance. The fact that the disputed fund was deducted from a balance does not mean that Kropf was entitled to receive the funds. The deduction only meant that the fund consisted of money which may be owed to Kropf at a later date. The case of United States v. Bank of Celina, 721 F.2d 163 (6th Cir.1983) is distinguishable because the bank had maintained the property of the depositor subject to his right of withdrawal when the lien was filed. Here, Palmer-Smith never possessed Kropf's property.
Finally, the Government argues that, at a minimum, Kropf had a right in quantum meruit for payment on the work that it had completed. This position is incorrect, in that Michigan law forbids a quantum meruit recovery where an express contract already covers the subject matter. See Boughton v. Boughton's Estate, 111 Mich. 26, 27-28, 69 N.W. 94 (1896); Superior Ambulance Service v. Lincoln Park, 19 Mich.App. 655, 663, 173 N.W.2d 236 (1969) ("there can be no recovery in quantum meruit upon an implied contract where an alleged express contract, in substance, covers the same subject matter"). Here, the express contract explicitly made payment subject to "authorized deductions." Kropf had no matured right to quantum meruit recovery because any such right was contingent on the deductions. The Government concedes that there is an express contract which covers *648 the relationship between Palmer-Smith and the taxpayer. Hence, the quantum meruit argument must be rejected. The Government liens never attached.
Accordingly, Palmer-Smith is clearly entitled to judgment as a matter of law for the reasons which have been set forth in this Opinion.
IT IS SO ORDERED.
NOTES
[1] Subcontract 8105-13, which was signed on November 30, 1981, required Kropf to perform mechanical work for a lump sum amount of $1,380,000.00. Defendant's Exhibit B. Subcontract 8107-18, which was executed on January 4, 1982, obliged Kropf to do additional mechanical work for a lump sum amount of $3,222,200.00. Defendant's Exhibit C. Both contracts were identical except for amounts and descriptions of the construction work to be performed by Kropf.
[2] DATE OF UNPAID DATE NOTICE
PERIOD ASSESSMENT AND AMOUNT OF ASSESSED OF TAX LIEN
ENDED NOTICE & DEMAND ASSESSMENT BALANCE* FILED**
9/30/81 12/21/81 $ 83,086.09(T)
11,433.84(P) $ 131,827.10 6/7/82
37,307.17(I)
12/31/81 3/30/82 $ 474,044.11(T)
21,863.66(P) $ 576,498.79 7/28/82
80,591.02(I)
3/31/82 6/28/82 543,139.58(T)
50,181.94(P) 679,049.24 9/7/82
85,727.72(I)
6/30/82 9/27/82 207,659.42(T)
8,815.48(P) 246,115.85 12/10/82
29,640.95(I)
9/30/82 12/20/82 683,907.98(T)
23,886.29(P) 746,296.60 3/16/83
38,502.33(I) _____________
TOTAL: $2,379,787.58
* Plus accrued interest and penalties as allowed by law.
** Notice of Federal Tax Liens filed with the Register of Deeds, Wayne County, Michigan.
(T) Denotes tax assessed.
(P) Denotes penalty assessed.
(I) Denotes interest assessed.
[3] Article 6 reads:
The subcontractor shall do the work with promptness and diligence in strict compliance wih this Subcontract and pursuant to any directions of the Company or its Superintendent. If, in the opinion of the Company, the Subcontractor shall fail to perform the work in strict compliance with this Subcontract, or in any manner breach this Subcontract or engage in any bankruptcy, insolvency or arrangement proceeding, whether voluntary or involuntary, or upon cancellation for any reason of the Company's contract, or upon the occurrence of any disaster, act of any governmental body or other event, occurrence, or condition beyond the control of the Company, making, or tending to make performance of the work impractical or impossible, then the Company may, without relinquishing any other remedies it may have:
(a) Take over and enter on and perform, correct, repair or redo the work or hire others to do so, and to use in connection therewith all tools, machinery, equipment, materials, and subcontracts of the Subcontractor; and, to continue such performance for so long as it may deem necessary, and to charge to the Subcontractor all expense and damages the Company may incur in connection with the performance, correction, repair or redoing by it of such work or the work of other subcontractors which has been injured or altered by such performance, correction, repair or redoing of the work, even though the same may exceed the Subcontract amount, or
(b) Terminate and cancel the Subcontract by written notice to the Subcontractor, and it is agreed that in the event of such a cancellation and termination, that the Subcontractor shall receive as full payment for the portion of the work completely performed in full compliance with this Subcontract, as determined by the Company, the progress payments actually paid to the Subcontractor at the date of termination plus that percentage of the progress accrued payments retained by the Company less the amount of damages, as determined by the Company, of any nature arising out of or connected with a breach of this Subcontract.
[4] 26 U.S.C. § 6321 reads:
If any person is liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.
[5] The Court notes that where possible, courts are to construe a contract so as not to nullify a clause. See e.g. Remes v. Holland, 147 Mich. App. 550, 558, 382 N.W.2d 819 (1985); DeBoer v. Geib, 255 Mich. 542, 544, 238 N.W. 226 (1931). Thus, there is a strong presumption against the Government's interpretation which essentially results in the neutralizing of the last sentence of Article 3(c). As a result, this sentence can be seen at a minimum as expressing the parties' intentions that Palmer-Smith maintain the sole interest in the retained fund until all the time periods and obligations which were outlined in Article 3(c) were satisfied. Only then was Kropf entitled to payment. Given this intention, Kropf never had a right to the fund. Thus, the Government lien did not attach. However, this Court believes that Palmer-Smith should prevail even if the Government's view of Article 3(c) is adopted.
[6] Palmer-Smith has not conceded that it would have paid the disputed amount to Kropf but for this one deduction. The parties agree that Michigan contract law applies in this case. However, the result would be no different under Florida law.
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336 S.W.2d 85 (1960)
Elva SUTTON and Titus Sutton, Appellants,
v.
FOX MISSOURI THEATRE COMPANY, a Corporation, and the City of Joplin, Respondents.
No. 47743.
Supreme Court of Missouri, Division No. 1.
June 13, 1960.
*86 Edward V. Sweeney, Monett, William H. Burden, Joplin, for appellants.
Karl W. Blanchard, Ralph H. Smith, Jr., Seiler, Blanchard & Van Fleet, Joplin, for respondent Fox Missouri Theatre Co.
William O. Russell, Joplin, Loyd E. Roberts, Joplin, for respondent, City of Joplin.
HOLLINGSWORTH, Judge.
In this action, plaintiffs Elva Sutton and Titus Sutton, husband and wife, seek damages *87 in the total sum of $40,000 from Fox Missouri Theatre Company, a corporation, and the City of Joplin, Missouri, as a result of personal injuries sustained by Mrs. Sutton on December 26, 1957, when her foot caught upon the base of a recruiting sign placed and maintained by the U. S. Naval Department upon a public sidewalk in the City of Joplin in front of the entrance of the Fox Theatre, causing her to trip and fall upon the sidewalk as she attempted to walk through a crowd of the theatre's patrons standing in front of its theatre awaiting admission. The petition alleges Mrs. Sutton's damages for personal injuries sustained in the sum of $35,000 and Mr. Sutton's damages for loss of services, consortium and medical expenses incurred in the sum of $5,000. At trial in the Circuit Court of Jasper County, the trial court sustained separate motions filed by defendants at the close of plaintiffs' evidence and directed a verdict in favor of both defendants. Plaintiffs have appealed from the judgment rendered in accordance with the verdict so returned.
The negligence alleged against the City was that it allowed and permitted the sign to obstruct a portion of the sidewalk in front of the Fox Theatre, making it dangerous for pedestrian traffic to pass freely to and fro; that it knew the sign was in said location and knew that large crowds of people collected in front of the theatre for the purpose of buying tickets, causing the sidewalk to be heavily crowded, and knowingly permitted Fox to appropriate the sidewalk with its crowd, thereby creating a nuisance; that the City was negligent in permitting the nuisance to exist; and that its aforesaid negligence concurred with negligence of Fox in creating the dangerous condition. The negligence alleged against Fox was that it knew of the existence of the sign on the sidewalk in close proximity to its ticket window and entrance; that it appropriated the sidewalk in front of its place of business for its own use by attracting a large crowd and in failing to open its doors so that the crowd could enter its theatre and in failing to control or regulate the crowd and in causing and permitting the crowd to obstruct the sidewalk and obscure the view of the sign, rendering it dangerous for pedestrians; and that the aforesaid negligence of Fox concurred with the negligence of the City in failing to remove the sign.
Each defendant pleaded the insufficiency of the petition to state a cause of action against it, denied generally and specifically the facts and negligence alleged in the petition and alleged that Mrs. Sutton's injuries, if any, were caused in whole or in part, or were directly contributed to, by her negligence in failing to exercise ordinary care for her own safety, whereby both plaintiffs were barred of any right of recovery.
A detailed statement of the evidence, excluding that relating to the extent of Mrs. Sutton's injuries and Mr. Sutton's alleged general and special damages, is required.
Main Street in Joplin runs north and south. Fox Theatre, engaged in showing motion pictures, is and since 1955 has been located on the east side of the street, at 415 Main, in the "downtown" portion of the city. The front of the building is 18 feet, 7 inches in width. The sidewalk in front of the theatre and for several "doors" north and south thereof is approximately 10 feet, 6 inches in width. The ticket office sits back (east) of the building line 3 feet, 4 inches. Entrances into the theatre are on each side of the ticket office.
The naval recruiting sign over which Mrs. Sutton tripped had been maintained by the U. S. recruiting service upon the sidewalk in front of the theatre for an unstated number of years. Its position upon the sidewalk, however, was changed from time to time; sometimes it was placed near the curbline opposite the south end of the building; sometimes it was placed in like position opposite the north end; sometimes it was placed "on the inside." The city police department regularly and frequently patrolled the area in which the *88 theatre was located and the City had knowledge that the sign was maintained upon the street in front of the theatre and that its position in front thereof was shifted from time to time.
A picture of a portion of the front of the theatre and the sign, taken at sometime after Mrs. Sutton fell showing the sign placed near the curb opposite the south end of the theatre building, follows:
At the time Mrs. Sutton tripped upon the sign, it was situate on the sidewalk 8 to 12 inches from the curb in front of the ticket office, near the rear wheel of the bicycle shown parked at the curb and approximately at the "flagpole hole" shown in the picture. (The man shown walking south on the left side of the picture has passed the ticket office and is in front of the theatre entrance immediately south of the ticket office.) The sign is about two inches thick and 60 inches high. The width of its base is 35 inches across and 34 inches from front to back. The "cross base is an inch by a quarter inch scrap iron" and "the bottom of it is 3 and 1/8th inches off the ground."
At trial time, Mr. and Mrs. Sutton were, respectively, 72 and 64 years of age. They had lived in Joplin since 1941 and for thirteen years had lived at their present address. On the afternoon of December 26th, a clear day, they walked southward down town for the purpose of shopping at Macy's or Ramsay's stores, both of which are on the east side of Main Street, south of Fox Theatre. As they walked south on the sidewalk *89 along the east side of Main Street and approached the theatre at about 2:20 to 2:30 p. m., they noticed a crowd of people, composed mostly of teenagers and children, extending from two doors north of the theatre to a like distance south of it. The crowd occupied the entire sidewalk, "just like about a crowd will ordinarily stand waiting for something, just up together." They were not lined up and there was no one supervising them. December 26th was a holiday for school children and Fox had advertised a show calculated to be attractive to such children, to begin at 2:30 p. m.
As plaintiffs passed through the crowd, Mrs. Sutton was in front and Mr. Sutton followed, holding her by the arm. They proceeded slowly, "inching" southward upon the sidewalk, "this way and back this way." The crowd was described by plaintiffs as consisting of 150 to 200 people, as being "dense" but "not jam up against but close" together. There was not sufficient space open to enable them to see through the crowd, but they experienced no difficulty in seeing "what was ahead""the people on the sidewalk." The people composing the crowd were orderly, "milling about", "going no place." Mrs. Sutton, not as tall as the general crowd, is about 5 feet in height; Mr. Sutton 6 feet, 2 inches. Neither was unduly jostled or shoved. As they passed through the crowd, there was a girl sitting in the ticket office but, insofar as plaintiffs saw, she had not begun to sell tickets.
When they had reached the center of the crowd immediately in front of the theatre, Mr. Sutton saw the recruiting sign. It was, according to Mr. Sutton's testimony, on the sidewalk due west of the "corner of the ticket office, within 8 or 10 inches of the curb"; according to Mrs. Sutton's testimony, it was on the sidewalk due west of that office, about "a foot from the curb." Mrs. Sutton came directly in front of the sign, Mr. Sutton was directly behind her, within 3 or 4 feet of the sign. Mrs. Sutton, going slowly, saw the top half of the sign and turned to her left (east) to go around it. She "caught her (right) foot on that brace and she just shot headlong in the Fox Theatre passageway." Her shoe was jerked from her foot and she fell headlong, sustaining injuries.
Plaintiffs had known of the sign being kept in various positions in front of the theatre for quite some time. They had seen it there on previous occasions and, but for the crowd, they could easily have seen it on this occasion. They had priorly passed the theatre when there were crowds, but not as large as the one through which they were passing when Mrs. Sutton fell. Mr. Sutton testified that although both of them had seen the sign many times, they had never noticed how it was "set" or "made up." He testified that on the day in question he did not see the sign "until we got right down to it. * * * Because we wasn't paying no attention to itto the sign."
During his testimony, Mr. Sutton placed a large "O" on the picture above shown at the place where Mrs. Sutton's foot was caught on the sign. It shows that her foot caught in the lower brace on the left side of the sign as Mrs. Sutton confronted it and attempted to go to the left of it.
Mrs. Sutton further testified: Although she had seen the sign many times before she fell, she had never noticed how it was supported. As she and Mr. Sutton passed through the crowd on this occasion, it was "thick enough you couldn't see anything up the street, they was just all around," covering the entire sidewalk in front of the theatre building. She was trying to get through the crowd. She came right in front of the sign"would have gone right through it" had she continued. She turned to her left to get around it. If there had been no spreading base to it, she could have gotten around it safely. The crowd around it kept her from seeing it. As she attempted to go to the left of it, her right foot caught in the base. The sign was clearly and wholly visible when there was no crowd in front of the theatre.
On cross-examination, she further testified: There was no person immediately in *90 front of her when she tripped over it. She saw the top half of the sign as she came up to it, but never noticed the base, never thought of it "coming out like that." She was aware she was at the sign and aware that she had to make a detour to get around it and the base.
We are not apprised of the theory upon which the trial court ruled either of defendants' separate motions for a directed verdict. Both defendants, on appeal, insist the evidence definitely establishes that Mrs. Sutton was guilty of contributory negligence as a matter of law. The City also asserts (1) that obstructions placed upon the street for the benefit of the public do not render the street defective unless they unreasonably obstruct or endanger public travel and that the sign did not unreasonably endanger Mrs. Sutton; and (2) that the City was acting in its governmental capacity in permitting the sign to be maintained upon the street and while so acting the City is not liable even for its negligent acts. Fox asserts (1) that, being an abutting owner, it was under no obligation to keep the adjacent sidewalk free of obstructions originating from sources other than its own premises and that assuming all of the persons on the sidewalk were awaiting admission to the theatre, which Fox denies, such user thereof was proper and it was not negligent; (2) that the presence of the sign on the sidewalk was as well known to plaintiffs as to Fox and there can be no liability for injuries from dangers as well known to plaintiffs as to Fox; and (3) that the presence of the crowd was not a proximate cause of Mrs. Sutton's injuries.
It should be here also stated that plaintiffs allege (and both defendants deny) that the sign, in and of itself, was, when placed upon the sdewalk, inherently dangerous and constituted a nuisancea controverted issue of law and fact, which we find unnecessary to decide.
The matter of first concern is whether Mrs. Sutton was, as a matter of law, guilty of negligence contributing to her fall and resultant injuries; this, of course, for the reason that if she was, then neither she nor Mr. Sutton (his action being derivative) is entitled to recover.
Defendants contend that the evidence leaves no doubt that Mrs. Sutton was guilty of such negligence and cite many cases which they insist support their contentions. They point out that she had passed the theatre on many occasions; had seen the sign and well knew that it long had been maintained in front of the theatre; that on the day in question she was confronted with and saw the sign before tripping upon its base and was conscious of the fact that she had to go around it; that ordinary care for her own safety required her to exercise the diligence of a reasonably careful person confronted with a like situation to avoid tripping over its base; and that these facts, considered in the light of the cases cited, conclusively establish as a matter of law that she failed to exercise the care so required of her. Were the facts as simple as those upon which defendants premise their conclusion, we would be inclined to agree with them, but they are not.
Although the evidence shows that Mrs. Sutton had previously seen the sign in front of the theatre on numerous occasions, yet her testimony was that she had never noticed its base, and it must be conceded that the nature and content of the message on the sign is such as to attract the attention of the casual passerby to its message rather than to the formation of its base. Yet, despite this feature of the sign, we would have no hesitancy in holding that any person approaching the sign in daylight upon an uncrowded street in a position to see it in its entirety and observe the flaring out of the irons supporting it and whose attention was not otherwise reasonably distracted would be chargeable with negligence if he tripped over it in attempting to avoid coming into contact with it. That, however, is not the situation here presented. Here, Mrs. Sutton was confronted with the necessity of threading her *91 way through a "dense" crowd that extended from the curb to the building line, not only in front of the theatre but also on both sides of it. She was not as tall as the average height of the crowd and was primarily intent upon getting through the crowd and, to some extent, necessarily distracted by it. She did not and, it may be inferred, could not see the sign until she was immediately in front of and so close upon it that she could not see its base. Under these circumstances, would this court be justified in holding that she was guilty of negligence as a matter of law in attempting to go around the sign without first ascertaining that it was supported by iron braces which at the bottom thereof flared out to the front and back a distance of 34 by 35 inches and upon which she might trip if unaware of their presence? In other words, is this court to declare as a matter of law that reasonable care on her part required her to anticipate that defendants would permit to remain upon a public sidewalk in front of the theatre (at which a crowd of its patrons stood) a sign with a base so constructed that it well could catch her foot in attempting to go around it and, therefore, required her first to ascertain that it was supported by iron braces flaring out in front of its lower corners and then to avoid them? None of the cases cited by defendants nor any found by us shed any light upon a situation comparable to that here presented and nothing would be gained by further discussion of them. Typical of the many cases cited by defendants are: Wheat v. City of St. Louis, 179 Mo. 572, 78 S.W. 790; Clark v. Missouri Natural Gas Co., Mo.Sup., 251 S.W.2d 27; Jett v. City of Paris, Mo.App., 326 S.W.2d 365; Waldmann v. Skrainka Const. Co., 289 Mo. 622, 233 S.W. 242; Hamilton v. Laclede Electric Cooperative, Mo.Sup., 294 S.W.2d 11, 16; and Branscum v. Glaser, Mo.Sup., 234 S.W.2d 626, 627.
We are convinced and hold that the facts shown in evidence, considered from the standpoint of whether Mrs. Sutton was in the exercise of ordinary care under the circumstances shown, presented a jury question as to her contributory negligence. See Freeman v. Myron Green Cafeterias Co., Mo.Sup., 317 S.W.2d 303, 306-308 [6, 7, 8]; Goldman v. City of Columbia, Mo. App., 211 S.W.2d 541; Harbourn v. Katz Drug Co., Mo.Sup., 318 S.W.2d 226, 232. Contrast the cases of Clark v. Missouri Natural Gas Co., Mo.Sup., 251 S.W.2d 27, and Jett v. City of Paris, Mo.App., 326 S.W.2d 365, wherein the plaintiffs were well aware of the dangerous defect or obstruction and nothing had occurred to divert their attention from it.
As to the submissibility of the case against the City:
Its first contention is that "obstructions placed upon the street for the benefit of the public do not render the street defective unless they unreasonably obstruct or endanger public travel," citing in support thereof 19 McQuillin, Municipal Corporations, 3rd Ed., pages 196-197, 239, and Freeburne v. City of Emporia, 176 Kan. 503, 271 P.2d 298. We find no fault with that contention. The question to be determined is, therefore, whether a jury would be warranted in finding that a sign of the size and form here shown, placed and maintained upon a public sidewalk in front of a theatre at which crowds frequently assemble, would, under the circumstances here shown, unreasonably obstruct and endanger public travela question we later herein explore.
The next contention is that the "City was acting in its governmental capacity in permitting the sign to be maintained upon the street, and while so acting it is not liable even for its negligent acts." Cited in support of that contention are: Carruthers v. City of St. Louis, 341 Mo. 1073, 111 S.W.2d 32; Auslander v. City of St. Louis, 332 Mo. 145, 56 S.W.2d 778; Hiltner v. Kansas City, Mo.Sup., 293 S.W.2d 422; and Blackburn v. City of St. Louis, 343 Mo. 301, 121 S.W.2d 727. Each of those cases deals with traffic devices, signs or directions that allegedly were negligently *92 so placed or maintained by the city as to cause injury to the plaintiff. Each announces the doctrine that direction of traffic is a governmental function and that a city cannot be held liable in damages for its negligence in regulating or failing to regulate traffic. We think they have no bearing upon the City's permissive user of the sidewalk for the maintenance of the recruiting sign here under consideration. A municipality such as the City of Joplin derives its governmental powers from the state rather than from the federal government and exercises generally only such governmental functions as are expressly or impliedly granted it by the state. Certainly, we have found no case or text, and the City has directed our attention to none, whereby we may conclude that it engages in a governmental function in lending its moral support to the recruitment of enlistees in the armed forces. Finding no basis for any reasoned conclusion that it acted in a governmental capacity in permitting the sign to be placed and maintained as shown by the evidence, we can only conclude that, in so doing, it must be held to have acted in its municipal capacity. In assuming to act as though it were in duty bound to permit the sign to be placed upon the City's sidewalk, we think it must be held to account for injuries sustained by users of the sidewalk as a direct result of its negligence in the performance of the duty so assumed. "A municipality cannot escape responsibility for the careful performance of a duty which is substantially one of a local or corporate nature because it may in some general way also relate to a function of the government, or although it may inure incidentally to the advantage of the public." 38 Am.Jur., Municipal Corporations, § 574, p. 268.
The law in Missouri is clear that it is the primary and non-delegable duty of the city to exercise ordinary care to keep its streets in a reasonably safe condition for travel. This duty is clearly set forth and buttressed by the cases cited in Burgess v. Kansas City, Mo.App., 242 S.W.2d 591. In that case the city had issued a permit to one of the original defendants, Koury, to operate a lunch wagon on the parkway between the sidewalk and curbing on Southwest Boulevard. An angle iron was attached to the wagon so that it could be pulled from place to place. The angle iron was about 18 inches long, 4 or 5 inches wide, 3 inches thick, and projected out from the wagon at a level of about 1 foot above ground. Plaintiff parked his automobile near the location of the wagon after dark. He got out of the car, started walking across the parkway toward the sidewalk, struck his leg against the protruding angle iron, causing severe injuries. The city attempted to shift the responsibility from it to Koury. The court, in passing on that question, stated, loc.cit. 592:
"We think the city had the legal right and duty to remedy the condition, which the jury found was dangerous, and that it could not escape liability by shifting that responsibility to defendant, Koury. City of Springfield v. Stevens, 358 Mo. 699, 216 S.W.2d 450, 459; Crockett v. City of Mexico, 336 Mo. 145, 77 S.W.2d 464, 466; Benton v. City of St. Louis, 217 Mo. 687, 118 S.W. 418; Young v. City of St. Louis, Mo.App., 178 S.W.2d 641, 646; State ex rel. Kansas City v. Shain, Mo.Sup., 177 S.W.2d 511, 512; Carruthers v. City of St. Louis, 341 Mo. 1073, 111 S.W.2d 32, 35; Wendegatz v. Kansas City Gas Co., Mo.App., 217 S.W.2d 269; Hall v. City of St. Joseph, 163 Mo.App. 214, 146 S.W. 458. In Benton v. City of St. Louis, supra, the court said, 217 Mo. 700, 118 S.W. 421: `A city owns and controls its streets as a trustee for the public. It, therefore, stands charged by the law with the primary and bounded duty of keeping them free from nuisances, defects and obstructions caused by itself or by third parties if it (in the latter instance) had actual or constructive notice thereof in time to abate the nuisance, remove the obstruction, or repair *93 the defect. It cannot shirk that duty, or shift it over to, or halve it with, others. So much is clear law in Missouri.'"
As hereinabove indicated, we do not hold that the sign, when placed upon an open sidewalk so that it could be viewed in its entirety by persons in the exercise of ordinary care for their own safety, would necessarily amount to such a hazardous obstruction as to subject the city to liability. But, we are convinced that when it is shown, as the evidence herein tends to show, that the sign and especially the base thereof was closely surrounded by a dense crowd of people so as to obstruct a view of its base and endanger the safety of a person using the sidewalk in the exercise of ordinary care for his own safety, then a duty rested upon the City to cause its removal or to warn travelers using the sidewalk of the hazard existing, if the City in the exercise of ordinary care knew or should have known of the condition. See cases above cited. And we are further convinced that the evidence would warrant a finding that the City knew or in the exercise of ordinary care should have known (1) that the sign, maintained in varying positions in front of the theatre, might and well could become so obscured by crowds there gathered as to endanger persons using the sidewalk to pass through the crowd, and (2) that it knew or in the exercise of ordinary care should have known that crowds did gather in front of the theatre here involved; it does not contend otherwise. So concluding, we hold that a submissible case was made against the City.
As to the submissibility of the case against Fox Theatre:
It is true, as contended by Fox and conceded by plaintiffs, that as a general rule an abutting property owner is under no obligation to keep an adjacent sidewalk free of defects and obstructions originating from sources other than its own premises. Stith v. J. J. Newberry Co., 336 Mo. 467, 79 S.W.2d 447, 453; Berry v. Emery, Bird, Thayer Dry Goods Company, 357 Mo. 808, 211 S.W.2d 35, 40; Restatement, Torts, Vol. 2, § 349, p. 956. But it also is a well established principle of law that an abutting owner "is subject to liability for bodily harm caused to travelers [on the highway] by a failure to exercise reasonable care to maintain in reasonably safe condition any structure or other artificial condition created in the highway by him or for his sole benefit * * *" (Emphasis supplied.) Restatement, Torts, Vol. 2, § 350, p. 958. An exemplification of that rule is shown in Reedy v. St. Louis Brewing Ass'n et al., 161 Mo. 523, 61 S.W. 859, 861, 53 L.R.A. 805 wherein it is said:
"This liability does not arise from the fact that he is owner of property abutting the sidewalk, but from the fact that he is instrumental in causing the condition, either by his willful act or negligent omission to perform a duty which the law imposes on him. If he is allowed an extraordinary use of the sidewalk for his private convenience, as, for example, to place in it a manhole for the reception of coal (Benjamin v. Railway Co., 133 Mo. 274, 34 S.W. 590), a water meter (Carvin v. City of St. Louis, 151 Mo. 334, 52 S.W. 210), or an excavation in close proximity to the sidewalk for a foundation for a new building (Wiggin v. City of St. Louis, 135 Mo. 558, 37 S.W. 528), the law imposes on him the exercise of reasonable care to guard the public from injury in such use. And it may be said that if the individual neglect to perform any duty that the law imposes on him in particular, and a dangerous condition of the sidewalk results, then a new duty on him in relation to that condition arises, and, of course, with greater force, it would be so if that condition was the result of his willful act."
See also Fletcher v. North Mehornay Furniture Co., 359 Mo. 607, 222 S.W.2d 789, 793-794 [3]; State ex rel. Shell Petroleum *94 Co. v. Hostetter, 348 Mo. 841, 156 S.W.2d 673, 675; Stith v. J. J. Newberry Co., supra, 336 Mo. 467, 79 S.W.2d 447, 453.
Fox insists that the rule announced in these cases is not applicable. It argues that, inasmuch as persons have a right to congregate upon and use the public sidewalks for a proper purpose so long as they do not unreasonably obstruct traffic; inasmuch as Fox, an abutting owner, had the right to use the sidewalk under an "easement of access", including the privilege of its patrons to occupy the sidewalk for a reasonable length of time in obtaining access to its theatre; and, inasmuch as the crowd so assembled was not shown to have been collected in front of the theatre for more than six or seven minutes in any event, was orderly and did not jostle or unduly impede the progress of plaintiffs as they went through it: Mrs. Sutton's injuries were not the result of any negligent act on its part.
We are forced to the conclusion that the arguments so advanced do not answer the essential question here presented. Here, the evidence, we think, would warrant a jury in finding: (1) that the crowd assembled in front of the theatre was predominantly composed of Fox patrons awaiting admission thereto; (2) that it was assembled at the instance of Fox for the benefit of Fox; (3) that, while the crowd, as such, presented no hazard to the safe progress of Mrs. Sutton, yet, as it stood and "milled around" the sign, it prevented Mrs. Sutton, in the exercise of ordinary care for her own safety, from seeing and appreciating the hazard of attempting to step around its extended base; (4) that Fox was chargeable with notice of the location of the sign and was chargeable with notice of the hazard thus presented; and (5) that the "artificial condition" thus created on the sidewalk by Fox, in causing and permitting the crowd assembled by it for its own benefit to gather so closely around the sign as unreasonably to endanger safe passage along the sidewalk by Mrs. Sutton, imposed upon Fox "the exercise of reasonable care to guard the public from injury in such use". Reedy v. St. Louis Brewing Ass'n et al., supra [161 Mo. 523, 61 S.W. 861, 53 A.L.R. 805] and brought Fox within the rule of law above quoted from Restatement, Torts, Vol. 2, § 350, p. 958.
Fox also contends that the presence of the sign was as well known to Mrs. Sutton as to Fox and that there can be no liability for injuries from dangers as well known to her as to Fox. Typical of the cases cited in support of that contention are: Fletcher v. North Mehornay Furniture Co., 359 Mo. 607, 222 S.W.2d 789, 794; Schmoll v. National Shirt Shops, 354 Mo. 1164, 193 S.W.2d 605; Howard v. Johnoff Restaurant Co., Mo.Sup., 312 S.W.2d 55, 57. These cases involve injuries sustained by the plaintiffs therein by reason of: In Fletcher, a slick terrazzo sidewalk in front of defendant's store; in Schmoll, a slick terrazzo lobby floor in defendant's store; in Howard, a waxed dance floor in defendant's restaurant. In each of them, the general rule was stated that the basis of liability of the owner of these business institutions to its invitees (or persons using the sidewalk in front of defendant's premises) was the owner's superior knowledge of the dangers presented and that the owners were not liable for injuries from dangers which were obvious or as well known to the plaintiffs as to the owner. That general rule is the law in Missouri, but we think it is not applicable to the facts in this case; this, for the reason that we have found that the testimony would warrant a finding that defendants did have or were chargeable with knowledge of the hazardous condition with which plaintiff came into contact and that plaintiff did not.
Fox further contends that there was no substantial evidence from which a jury could find the persons on the sidewalk were all awaiting admission to Fox, and even so, the presence of the crowd was not a proximate *95 concurring cause of Mrs. Sutton's injuries. In support of that contention Fox divides its argument into two propositions: First, it says that the evidence does not support a finding that the people standing in front of "seven" different business establishments were awaiting admission to the theatre. It may be conceded that there is no direct evidence that all of them were. But, we think the circumstances shown in evidence, which we need not here again state, do warrant submission of a finding that the crowd, especially that portion standing in front of the theatre and surrounding the sign, was predominantly composed of Fox patrons. Second, it contends that the crowd was not a concurring proximate cause of Mrs. Sutton's injuries. Its argument runs this wise: Mrs. Sutton's view of the sign was obscured by the crowd until she reached a point immediately north of it; at that time she saw it and realized she needed to turn and go around it; there was no one standing in front of it at the time she caught her foot; when she reached it she did not change her course of direction to keep from running into some person standing in front of the sign, she changed her course to keep from going right through the sign; ergo, the crowd ceased to be a causative factor when Mrs. Sutton reached the sign immediately prior to the time she turned to go around it and there is no substantial evidence in the record that the crowd prevented Mrs. Sutton from seeing the sign and the base at the time she was making her turn to go around it.
Pellett v. Thomas W. Garland, Inc., Mo. Sup., 152 S.W.2d 172, 173, is cited in support of that contention. It merely holds, in substance, as we read it, that when a customer of defendant's store was thrown to the floor from a chair in which she was sitting in an aisle of the store by reason of the intervening negligent act of a third person, there was no liability on the part of defendant. That case is not persuasive under the facts here shown. We think our analysis of the law and the facts as applicable to submissibility of the case against Fox sufficiently demonstrates that a jury would be warranted in finding that the acts and omissions of Fox as above detailed constituted a direct and proximate cause of Mrs. Sutton's injuries.
We, therefore, hold that a submissible case was made against each and both defendants and that the court erred in directing a verdict against plaintiff and in entering judgment in favor of defendants.
The judgment is reversed and the cause remanded for further proceedings not inconsistent with the views herein expressed.
All concur.
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91 N.J. Super. 202 (1966)
219 A.2d 635
RUDOLPH GRILLO, TRADING AS SOMERSET REAL ESTATE CO., PLAINTIFF,
v.
THE BOARD OF REALTORS OF THE PLAINFIELD AREA, ET AL., DEFENDANTS.
Superior Court of New Jersey, Chancery Division.
Decided April 27, 1966.
*206 Messrs. Shavick, Thevos, Stern, Schotz & Steiger, attorneys for plaintiff (Mr. Howard Stern, appearing).
Messrs. Abrams, Kestenbaum & Hendricks, attorneys for defendant Board of Realtors (Mr. Norman J. Abrams, appearing, assisted by Mr. C. Douglas Reina).
Messrs. Feuerstein & Sachs, attorneys for individual defendants (Mr. Harold Feuerstein, appearing).
HERBERT, J.S.C.
Plaintiff Rudolph Grillo is a real estate broker licensed by the State of New Jersey under N.J.S.A. 45:15-10. Since July 1958 he has been the proprietor of his own real estate brokerage business in Plainfield, trading as Somerset Real Estate Co. He alleges that defendants, who are The Board of Realtors of The Plainfield Area, Inc. (the Board) and its member firms, are engaged in illegal practices. He demands a judgment declaring the Board to be an unlawful combination in restraint of trade and declaring its constitution, by-laws and rules and regulations relating to the multiple listing system which it conducts to be contrary to public policy and invalid. He seeks injunctive relief against continuation of the allegedly wrongful practices and, in addition, asks for compensatory and punitive damages.
Plaintiff is not a member of the Board. For a time prior to 1958 he was affiliated with the Board, but only as an employee of a Board member. During the last eight years he has submitted several applications for membership, but each time he has been rejected. He does not demand a judgment compelling the Board to admit him, but he does assert that its restrictions upon membership are an important element in the success of those business methods which he says are illegal and harmful to him and to other licensed brokers who are not members of the Board.
The defendant Board was organized under Title 15 of the Revised Statutes as a nonprofit corporation. It is a "Member Board" of the National Association of Real Estate Boards *207 and is affiliated with the New Jersey Association of Real Estate Boards. The membership of the Board includes the great majority of active real estate brokers and salesmen in the territory of the Board. The jurisdiction of the Board, as approved by the national organization, covers portions of Union, Middlesex and Somerset Counties, including all of Plainfield, North Plainfield, Dunellen, Scotch Plains and Fanwood.
The Board has several classes of members, but only the "Active" class is important for present purposes. Art. III, § 2 of the Board's revised constitution sets out qualifications for "active" membership as follows:
"Active Members shall be brokers duly licensed by the State of New Jersey, who as principals, partners, corporate officers or trustees, are engaged principally in buying, selling, exchanging, renting or leasing, managing, appraising or financing Real Estate for others for compensation, whose principal place of business is located in the territory of the Plainfield Real Estate Board, as approved by the State and National Association of Real Estate Boards. Any individual having the above qualifications shall be eligible for active membership.
An applicant for Active Membership shall be required to have been for at least one year immediately preceding the date of application, a principal, partner, corporate officer or trustee with the office with which he is associated at the time he applies for membership (said office being in the territory of The Board of Realtors of The Plainfield Area); except in the case of an applicant who for the preceding two (2) years has been associated with a Plainfield Realtor as principal, partner, corporate officer, trustee or salesman with Salesman's Membership in the Board."
An applicant for "active" membership is required to fill out and sign a printed form which calls for considerable information about himself. He must furnish the Board with the names of three Board members to whom the Board may refer and three additional business references. The form must be accompanied by a check for $1,000 to pay the stipulated initiation fee. In the form is an express promise by the applicant to abide by the Board's constitution, by-laws and rules and regulations, and the Code of Ethics of the National Association of Real Estate Boards.
*208 The procedure to be followed when an application for membership is received is provided by Art. IV, § 4 of the Board's constitution:
"* * * Upon receipt of an application for Active Membership, the Membership Committee Chairman shall advise the Board of Directors of the name of said applicant, who shall be voted upon by the Board at a meeting no sooner than sixty (60) days from receipt of said application. During this sixty (60) day period any Member of the Board may contact the Membership Committee to convey any information relative to the applicant. The Board Secretary shall within five (5) days of receipt of said application notify the Chairman of the Membership Committee who in turn within five days shall hold a meeting of his Committee and said Committee shall within thirty (30) days of such meeting, complete its investigation of and interview with the applicant and shall file a written report of its findings together with its recommendation to the Executive Committee. The Executive Committee shall consider the application within five days of receipt of report from the Membership Committee and if approved, the Secretary shall notify the active members as to the meeting at which the application will be voted upon. The applicant shall be advised in writing of the decision of the Board by the Board Secretary immediately upon the determination of such decision."
Although this quotation indicates an application can come to a vote by the members only after being approved by the executive committee, there is testimony in the record to the effect that the Board, recently at least, has eliminated the veto power of the executive committee.
An applicant is elected to the Board "when his written application has received the affirmative vote of a majority of the Board of Directors present * * *." The "Board of Directors" is defined by Art. VII, § 1 as "the elective officers and all active members of the Board."
The Board operates a service for the multiple listing of properties for sale. The function of this is to expose the listings obtained by each Board member to the sales efforts of every other Board member.
The Board has adopted official multiple listing rules and regulations. With minor exceptions any listing of a property for sale with a member of the Board must be by a standard form of agreement which gives to the listing broker and "all *209 active Realtor members of the Plainfield Real Estate Board the exclusive right to sell." A member who has obtained a multiple listing agreement from an owner is required to file that agreement within 24 hours in the multiple listing office maintained by the Board. The staff of that office then sends out information about the listed property and the terms of listing to all Board members. Every member and his sales staff then has knowledge that the particular property is being offered for sale and may offer it to prospective buyers.
A member who secures a listing is given discretion to choose between an exclusive or multiple one only if the property involved is a real estate development consisting of five or more individual dwelling units, a single structure containing five or more dwelling units, or a commercial, industrial or "management" property. There is an express provision that no property other than the exceptions just mentioned "may be exclusively listed by a Realtor member without prior approval of the Multiple Listing Committee." The rules and regulations state that commissions on the sale or rental of a multiple listing "must" be divided as follows: listing realtor 20%, selling realtor 75% and multiple listing service 5%.
Section 7 of the rules and regulations before February 1963 provided:
"Commission Agreement With Non-Members
(A) There shall be no cooperation with non-members located within The Board of Realtors of The Plainfield Area Territory on Multiple Listed properties.
(B) Multiple listed property within the Plainfield Area Board territory can only be shown and sold by Plainfield Area Board members. However, Realtors and brokers and other licensees outside the Plainfield Area Board territory can send or refer their prospects to any Plainfield Area Board member. In the event a sale is consummated and a commission paid, the Plainfield Area Board member effecting the sale and receiving the commission shall be obligated to pay 30% of the commission received to the sender."
On February 21, 1963 this section was amended to make it possible for local nonmembers to refer their "prospects" to members of the Board:
*210 "Rule 7A There shall be cooperation with non-members located within the Board of Realtors of the Plainfield Area on Multiple Listing properties.
Rule 7B Multiple Listed property within the Plainfield Area Board can only be shown and sold by Plainfield Area Board Members. However, Realtors and brokers and other licensees within and outside the Plainfield Area Board territory may send or refer their prospects to any Plainfield Area Board Member. In the event a sale is consummated and a commission paid, the Plainfield Area Board Member effecting the sale and receiving the commission shall be obligated to pay thirty (30) per cent of the net commission received by the Selling Realtor (net commission is the amount after the Multiple Listing fee and the Listing Realtor's commission are deducted. This will also apply where it is the Selling Realtor's Multiple Listing.)."
Some witnesses testified that there was actually some participation on this limited basis with local nonmember brokers. However, the Board's edict against the showing of multiple listed homes by nonmember brokers was enforced. In 1962 a notice was sent to Board members in the name of the Board's president. It gave the text of section 7, as it then read, and closed with this warning:
"WE KNOW THAT Multiple Listings are being shown by local non-members. Any Realtor doing this is in violation of our rules. Any infringement will be dealt with severely."
In one instance, a member was fined $500 for permitting a local non-member to show and sell a multiple listed home. Concerning that incident the following entry appears in the minutes of the Board's executive committee for May 27, 1964:
"Infraction of Multiple Listing Rules a serious one Protect Home Rule and prevent leakage to outsiders If transaction does not go through, there would be no penalty therefore, fine $500."
If every licensed real estate broker in the Plainfield area could become a member of the Board for the asking, no nonmember would have cause for complaint about being excluded from the benefits of the multiple listing service. Anderson v. United States, 171 U.S. 604, 616-618, 19 S.Ct. 50, 43 L. *211 Ed. 300 (1898). However, from what has already been said it will be clear enough that restrictions upon admission to membership do exist. Several applications for membership, in addition to that of plaintiff, have been voted down; one, I am sure, because the applicant was a Negro. There is also the very substantial initiation fee of $1,000. The size of the fee is itself a restriction upon membership. There is a strong inference that the amount has been set as a barrier against applications which would otherwise be filed. No showing was made by the Board that such a fee bears any reasonable relation to the cost of admitting a new member. Hurdles are placed, too, in the way of newcomers. Art. III, § 2 of the Board's constitution (quoted above) fixes a waiting period of one year for the licensee who comes from elsewhere, opens his own office in the area and desires to apply for active membership.
Plaintiff contends that the great majority of all residential premises for sale within the Board's territory are offered through the Board's multiple listing service. He asserts that because a broker who is not a member of the Board is not permitted to participate in the benefits of the service he is precluded thereby from offering any of these premises for sale, and cannot compete successfully with Board member brokers. Plaintiff urges that the Board, in operating the multiple listing service to the exclusion of non-Board members, is engaged in an unlawful restraint upon the practice of the real estate profession and in an illegal restraint of trade.
I.
It is argued for the defense that the New Jersey Real Estate Commission, functioning under N.J.S.A. 45:15-1 et seq., has exclusive original jurisdiction over the subject matter involved in this litigation. Therefore, defendants urge, plaintiff must take his case to the Commission and exhaust his administrative remedies before asking a court to grant him relief.
*212 Defendants' position is unsound. Jurisdiction of an administrative agency is exclusive when the remedy which the agency is empowered to grant is the only available relief for the given situation. The New Jersey Real Estate Commission has power to hear complaints against its licensees for the purpose of deciding whether licenses should be suspended or revoked. N.J.S.A. 45:15-17 and 18. There is nothing to indicate that the Legislature intended to displace all common law actions in the courts when it gave to the agency these powers over licenses. Contrast may be made to the provisions making a claim for workmen's compensation enforceable only by an original proceeding in the Division of Compensation. N.J.S.A. 34:15-49. See Bendler v. Bendler, 3 N.J. 161, 171 (1949). Plaintiff in this case has two avenues available to him: one by complaint against licensees in the administrative forum under the statute, and the other in the court under the common law. The jurisdiction of the Real Estate Commission in this field is not exclusive. See 2 Am. Jur.2d, Administrative Law, § 784, p. 684.
N.J.S.A. 45:15-17 ends with the following language:
"The commission is expressly vested with the power and authority to make, prescribe and enforce any and all rules and regulations for the conduct of the real estate brokerage business consistent with the provisions of this act."
From this it may be argued that the primary jurisdiction doctrine should be applied in this case, i.e., that even though there is a judicial remedy in this field, the situation is such that judicial relief cannot be supplied without a prior determination by the New Jersey Real Estate Commission concerning the activity of defendants in this case. This argument must also be rejected. The above language cannot be construed as a grant of power to inquire into and make decisions concerning legal liability of licensees for practices in the real estate brokerage business. Even if this provision could be so construed, it nevertheless would be appropriate at this time to decide all of the questions now before the court. *213 Plaintiff's right to relief depends substantially upon answers to questions of law and the findings of fact which are pertinent to those questions are not ones requiring the specialized knowledge and experience of the Commission. See 2 Am. Jur.2d, Administrative Law, § 793, p. 696.
II.
Does the plaintiff, a private citizen who says his business has been damaged by a combination of competitors have a cause of action which he can assert against them? The monopolistic effects of restraint of trade have been regarded historically as matters of public concern rather than as mere private wrongs to be remedied by private suits. Chief Justice White said in Standard Oil Company v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1910):
"Without going into detail, and but very briefly surveying the whole field, it may be with accuracy said that the dread of enhancement of prices and of other wrongs which it was thought would flow from the undue limitation on competitive conditions caused by contracts or other acts of individuals or corporations led, as a matter of public policy, to the prohibition or treating as illegal all contracts or acts which were unreasonably restrictive of competitive conditions, either from the nature or character of the contract or act, or where the surrounding circumstances were such as to justify the conclusion that they had not been entered into or performed with the legitimate purpose of reasonably forwarding personal interest and developing, trade, but, on the contrary, were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public and to limit the right of individuals, thus restraining the free flow of commerce and tending to bring about the evils, such as enhancement of prices, which were considered to be against public policy." (at p. 58, 31 S.Ct., at p. 515)
New Jersey has few authorities applicable to combinations in restraint of trade. The same comment can be made about state courts generally. Cases involving charges of malicious and deliberate actions by conspirators for the purpose of damaging a plaintiff's business are not in point. Examples from this class are Van Horn v. Van Horn, 52 N.J.L. 284 (Sup. *214 Ct. 1890), and Louis Kamm, Inc. v. Flink, 113 N.J.L. 582 (E. & A. 1943). The plaintiff does not allege, and has not proved, that defendants in carrying on the restrictive practices which are challenged have been motivated by malice towards him.
A leading English case is Mogul S.S. Co. v. McGregor, 23 Q.B.D. 598 (Ct. App. 1889), affirmed in the House of Lords, [1892] A.C. 25. It was held there that a ship owner, damaged by being excluded from the tea shipping trade with China as a result of a combination of the defendants also ship owners had no cause of action, there being no proof that defendants had been motivated by anything but a desire to secure the trade for themselves and keep plaintiff and others out of it. In both the Court of Appeals and the House of Lords the point was made that illegality of combinations in restraint of trade would make them unenforcible between the parties, but would not give a damaged competitor a cause of action against the members of the combination.
The rule of the Mogul case was regarded by Vice-Chancellor Stevens as a bar to a suit brought by the Attorney General to enjoin rate fixing by a group of insurance companies. McCarter, Attorney General, v. Fireman's Ins. Co., 70 N.J. Eq. 291 (Ch. 1905). The Court of Errors and Appeals reversed, however (over a strong dissent by Justice Swayze). 74 N.J. Eq. 372 (1909). In the opinion for the majority it was said:
"The case of Mogul Steamship Co. v. McGregor [23 Q.B.D. 598], cited by the Vice-Chancellor, and relied upon by counsel for respondents, is not in point. There a court of law decided that a contract in restraint of trade, made by one set of shipowners, did not give another set of shipowners a legal cause of action against them for damages. The case has no bearing whatsoever upon the attitude of a court of equity when a suit is brought on behalf of the state in the interest of the public.
That the reasoning of Mogul Steamship Co. v. McGregor, even within the lines of its decision, is not likely to commend itself to jurisprudence generally is pointed out in an instructive article on `The Case of the Monopolies' by Sidney T. Miller, Esq., in the `Michigan Law Review' for November, 1907. Upon the point we are considering the case has no bearing whatsoever." (at p. 388, 73 A., at p. 86)
*215 And
"We cannot avoid, therefore, the following conclusions: First, that the increase of price wronght by this combination of insurers has not been justified; second, that such increase works actual injury to the public; third, that the contract by which such combination was effected is in restraint of trade and repugnant to public policy on that account, and fourth, that it is unreasonable in that it transcends the legitimate purposes for which the defendants were created or licensed and that such combination itself is characterized by all the evils that the common law by its rule against them placed under its condemnation. That the corporate acts by which such contract was entered into and such combination effected and its continuance perpetrated are ultra vires the defendants needs no further argument; that the defendants should be enjoined from such continuance follows from what has already been said." (at p. 392)
Turning to more recent cases, Di Cristofaro v. Laurel Grove Memorial Park, 43 N.J. Super. 244 (App. Div. 1957), involved charges of parallel business action, detrimental to the plaintiffs, by three incorporated cemetery associations; but plaintiffs' allegations seem to have fallen short of charging a combination in restraint of trade. In any event, the case was decided in favor of plaintiffs on the ground that defendants were acting ultra vires and that plaintiffs had standing, because their business was affected, to seek equitable relief against the ultra vires practices. A situation similar to that of the Di Cristofaro case was presented in Terwilliger v. Graceland Memorial Park Ass'n, 59 N.J. Super. 205 (Ch. Div. 1960), affirmed 35 N.J. 259 (1961). There the Attorney General was joined as a party defendant, thus easing the problem of the right of a private citizen to sue to enjoin ultra vires acts harmful to his business. However, the Supreme Court said:
"In the actuality of business activity, plaintiff and defendants are competitors in the sale of grave markers. There can be no doubt that defendants' intimate relationship with lot owners and members of the bereaved families gives them a competitive advantage over plaintiff in a locality where they both vie for customers. In view of the general public interest in the operation of cemeteries, the law asks only a slight additional private interest as justification for seeking the remedial *216 services of the court. Whatever may be the requirement in ordinary cases, the combination of public policy considerations and status as a competitor in the locality must be treated as providing adequate standing in this type of controversy. Hudson Bergen County Retail Liquor Stores Ass'n v. Board of Comm'rs, City of Hoboken, 135 N.J.L. 502, 510 (E. & A. 1947); and see Walker v. Borough of Stanhope, 23 N.J. 657 (1957); Di Cristofaro v. Laurel Grove Memorial Park, supra, 43 N.J. Super., at pp. 253-254." (at p. 268)
Falcone v. Middlesex County Medical Society, 34 N.J. 582 (1961), is another case in which a private citizen was given relief against a situation harmful to his economic activities. While the relief sued for was a judgment requiring the Society to admit the plaintiff to membership, the basic question was the power of a private association to restrict an individual, licensed by the State, to practice his profession. To that extent the case is similar to the one presented by plaintiff here.
It can be argued strongly that the principles stated by the Supreme Court in Terwilliger are applicable here: that in addition to the public concern with monopolistic practices, there is a specific public interest in the real estate business shown by the scheme of regulation provided by statute (N.J.S.A. 45:15-1 et seq.) and that Mr. Grillo, because of his status as a licensed broker competing in the community where the alleged unlawful combination has a direct effect upon him, has more than a "slight additional private interest as justification for seeking the remedial services of the court." Yet such an argument must be considered critically. It could be advanced in support of a suit by a businessman to enjoin a competitor from falsely advertising the qualities of a product offered for sale by both. Up to now, however, suits in that form, though involving obvious elements of public concern and private interest, have not been sustained. American Washboard Co. v. Saginaw Mfg. Co., 103 F. 281 (6 Cir. 1900); Show Management v. Hearst Publishing Co., 196 Cal. App.2d 606, 16 Cal. Rptr. 731, 735-737 (D. Ct. App. 1961). Nevertheless, I conclude that the plaintiff Grillo is entitled to maintain his suit, there being an appropriate coupling *217 of public and private interests in the subject matter to justify that result.
Consideration of two precedents in addition to authorities already cited have helped to reach the conclusion just stated. Pratt v. British Medical Ass'n, [1919] 1 K.B. 244, furnishes good reason for thinking that the rule of the Mogul case would not now be applied by the courts of England to a situation like the one presented by the instant case. And there is direct authority for permitting a private litigant to sue for injunctive relief and damages against defendants who, though not motivated by malice toward plaintiff and not aiming specifically at his ruin, allegedly have engaged in a combination in restraint of trade harmful to plaintiff in his business or profession. Group Health Cooperative v. Kings County Medical Society, 39 Wash.2d 586, 237 P.2d 737 (Sup. Ct. 1951). There the court, after extensive review of authorities, said:
"We are of the view that, on both principle and authority, jurisdiction in equity should be exercised to grant affirmative relief where the contract or combination in restraint of competition results in irreparable injury to third persons. The same considerations lead us to conclude that monetary damages may also be recovered for such injury where the damage can be ascertained with reasonable certainty." (237 P.2d, at p. 775)
III.
Having decided that a private plaintiff may sue for relief against an illegal combination in restraint of trade, has such a combination been proved here?
The Board and its members are acting in combination. That combination is a restraint of trade. As Mr. Justice Brandeis observed in Board of Trade of City of Chicago v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 244, 62 L.Ed. 683 (1918), "Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence." But not every combination in restraint of *218 trade is illegal. In Trenton Potteries Co. v. Oliphant, 58 N.J. Eq. 507, 514 (E. & A. 1899), Chief Justice Magie said:
"* * * while the public interest may be that trade in general shall not be restrained, yet it also permits and favors a restraint of trade in certain cases."
It is the unreasonable combination in restraint of trade that is unlawful. Judge Learned Hand stated in United States v. Associated Press, 52 F. Supp. 362, 368 (S.D.N.Y. 1943), affirmed 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1944):
"* * * as everyone now agrees, since the decisions of the Supreme Court in Standard Oil Co. v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A., N.S., 834, Ann. Cas. 1912D, 734, and American Tobacco Co. v. United States, 221 U.S. 106, 31 S. Ct. 632, 55 L. Ed. 663, restriction alone is not enough to stamp a combination as illegal; it must be `unreasonable' in the sense that the common law understood that word; * * *."
It is the policy of the common law to encourage competition. United States v. Addyston Pipe & Steel Co., 85 F. 271, 283 (6 Cir. 1898), affirmed 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136 (1899). Action of a combination is "unreasonable" if its operation has or may have a tendency toward preventing competition, raising prices, or creating a monopoly and cannot be justified under the circumstances. See 36 Am. Jur., Monopolies, Combinations, and Restraints of Trade, § 5, p. 482. The same rule is indicated in McCarter, Attorney General, v. Firemen's Ins. Co., supra.
There is good in the multiple listing system. It provides an effective method for selling and buying properties. The seller benefits because his property is exposed in a number of offices, hence reaches a wider market in a shorter period of time. It is also useful and convenient to the prospective buyer who is seeking a house that will suit his needs and purse. From one selling agent he can learn of many of the properties for sale in the area. In effect, the multiple listing service operates as an exchange for the sale of real estate. The multiple listing system can potentially stimulate competition *219 in the real estate field by placing listings in the hands of all brokers in the area. Yet under the rules and regulations governing multiple listing each member of the Board has agreed that he will not supply information about properties for which he has obtained sale listings to nonmember brokers, but only to other members of the Board through the multiple listing service. The commitment to furnish information about properties for sale only to fellow members may be characterized as a concerted refusal to deal with nonmembers, or as a group boycott.
The dearth of precedent in New Jersey on combinations in restraint of trade has already been noted. Much litigation in this field has proceeded in the federal courts under federal anti-trust legislation. The Sherman Anti-Trust Act, 15 U.S.C.A. § 1, et seq., has been held to incorporate the common law principles of restraint of trade into federal statutory law. Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1910). While not binding upon our state courts, the federal anti-trust experience under the Sherman Act is applicable to questions of what is reasonable and unreasonable and serves as a useful guide for our common law restraint of trade problems.
Assaying their experience, the federal courts have determined that certain activities in combination, "because of their pernicious effect on competition and lack of any redeeming virtue," are conclusively presumed to be unreasonable and unlawful under the Sherman Act without inquiry into the harm caused by these practices or the business excuse for their use. Northern Pac. R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). The group boycott, or concerted refusal to deal, has been held to be within this forbidden category. Klor's Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959). However, as the present case is a novel one in a court of first impression, I feel that I must determine the legality of defendants' combination whether it is reasonable or unreasonable for myself.
*220 The United States Supreme Court has considered the effect on competition of the group boycott, or concerted refusal to deal. Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1944), involved a cooperative association composed of the publishers of more than 1,200 newspapers in the United States. Employees of the member newspapers of the association obtained news and transmitted it to the association, which in turn channeled it to the other members. The association's by-laws were so framed that members could block nonmember competitors from membership and prohibited members from furnishing news obtained by them to any nonmember in advance of publication. It was held that the purpose and effect of these by-laws was to hinder and impede the growth of competing newspapers, and hence they were contracts in restraint of trade. The court said:
"Inability to buy news from the largest news agency, or any one of its multitude of members, can have most serious effects on the publication of competitive newspapers, both those presently published and those which, but for these restrictions, might be published in the future." (at p. 13, 65 S.Ct., at p. 1421)
In Klor's Inc. v. Broadway-Hale Stores, supra, petitioner, a retail appliance dealer, alleged a conspiracy between a neighboring retail competitor and certain manufacturers and distributors of appliances not to sell to Klor's or to sell to it only at discriminatory prices. Holding that the lower courts had erred in dismissing the complaint, the Supreme Court said:
"Alleged in this complaint is a wide combination consisting of manufacturers, distributors and a retailer. This combination takes from Klor's its freedom to buy appliances in an open competitive market and drives it out of business as a dealer in the defendants' products. It deprives the manufacturers and distributors of their freedom to sell to Klor's at the same prices and conditions made available to Broadway-Hale and in some instances forbids them from selling to it on any terms whatsoever. It interferes with the natural flow of interstate commerce. It clearly has, by its `nature' and `character,' a `monopolistic tendency.' As such it is not to be tolerated merely because the victim is just one merchant whose business is so small that his destruction *221 makes little difference to the economy. Monopoly can as surely thrive by the elimination of such small businessmen, one at a time, as it can by driving them out in large groups." (359 U.S., at p. 213, 79 S.Ct., at p. 710)
More recently, Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963), was decided. Plaintiffs were traders in over-the-counter securities. Not being members of the Exchange, they arranged for private wires to trading departments of ten member firms of the Exchange. The Exchange disapproved these connections and required member firms to discontinue the wires. Concerning the effect of the loss of the wire service upon the plaintiffs and other dealers in securities, the court said:
"Unlike listed securities, there is no central trading place for securities traded over the counter. The market is established by traders in the numerous firms all over the country through a process of constant communication to one another of the latest offers to buy and sell. The private wire connection, which allows communication to occur with a flip of a switch, is an essential part of this process. Without the instantaneously available market information provided by private wire connections, an over-the-counter dealer is hampered substantially in his crucial endeavor to buy, whether it be for customers or on his own account, at the lowest quoted price and sell at the highest quoted price. Without membership in the network of simultaneous communication, the over-the-counter dealer loses a significant volume of trading with other members of the network which would come to him as a result of his easy accessibility. These important business advantages were taken away from petitioners by the group action of the Exchange and its members." (at p. 348, 83 S.Ct., at p. 1252)
Concerted refusals by professional or trade associations to deal have been held to be illegal in the following cases: Pratt v. British Medical Ass'n, supra; American Medical Ass'n v. United States, 317 U.S. 519, 63 S.Ct. 326, 87 L.Ed. 434 (1943); Tatkin v. Superior Court, 106 Cal. App.2d 745, 326 P.2d 201 (Cal. App. 1958); Hubbard v. Medical Service Corp. of Spokane County, 59 Wash.2d 449, 367 P.2d 1003 (Sup. Ct. 1962); People v. Santa Clara Valley Bowling Proprietors' Ass'n, 47 Cal. Rptr. 570 (D. Ct. App. 1965). Cf. Group Health Cooperative v. King County Medical Society, supra, 237 P.2d, at pp. 759-760.
*222 Plaintiff and others who are nonmembers of defendant Board are placed at a competitive disadvantage as a result of the defendants' action in combination. Nonmember brokers, unable to provide the advantages of the multiple listing system, may lose the listings of sellers who are interested in displaying their property to the widest possible audience. The prospective buyer who is interested in a broad selection will most likely go to a Board member who can offer him all the properties listed with other Board members in the area. The nonmember broker will not be able to serve effectively the prospective buyers who do come to him. He is precluded from offering for sale a high percentage of the properties which are for sale in the Board's area. Many of the properties for sale will be unknown to the nonmember broker although the Board member has easy access to this same information. If the nonmember broker does learn of a property which has been multiple listed, and finds a buyer for it, he will not be able to make the sale. The selling owner, already committed to pay a commission to a Board member, cannot afford to sell through the nonmember broker and pay another commission to him.
"His knowledge of available properties is the broker's chief stock in trade." Myers v. Arcadio, Inc., 73 N.J. Super. 493, 499 (App. Div. 1962). Listings are equivalent to the news items of the Associated Press case, to the appliances of the Klor's case, and to the information available by direct wire service in the Stock Exchange case. Without goods to sell the businessman cannot survive. The restrictions which defendants have placed in the way of a nonmember obtaining and using listings may drive that nonmember from the field of real estate selling. Since the newcomer cannot even apply for membership in the Board without a waiting period and then may fail of admission defendants' combination may discourage the opening of new offices. It has been recognized that effective or workable competition requires "the presence in the market of several sellers, each of them possessing the capacity to survive and grow, and the preservation of conditions *223 which keep alive the threat of potential competition from others." Wilcox, Competition and Monopoly in American Industry, p. 8 (T.N.E.C. Monograph No. 21, 1941).
A multiple listing system can broaden the market for real estate transactions and improve competition. However, I find that defendant Board's method of conducting its multiple listing service tends to stifle rather than promote competition. I find also that plaintiff has suffered diminution of profits in his business as a result of the restraints thus imposed upon full and free competition by defendants.
A combination in restraint of trade may be justified, however, under some circumstances, and if so justified is not illegal. Board of Trade of City of Chicago v. United States, supra. Can defendants justify their combination? They argue they may properly strive to establish and improve standards for their occupation. By restricting the multiple listing service to members of the Board and subjecting members to a Realtor Code of Ethics, the Board assures buyers and sellers entrusting their properties to its care that their affairs will be handled by competent, qualified and honest men. It is also urged that a member broker should not be compelled to cooperate on a sale with a broker who is not subject to the Board's disciplines and who may not be regarded as fully trustworthy.
A court should look with sympathy on attempts by business and professional associations to elevate standards. Falcone v. Middlesex Co. Medical Soc., 34 N.J. 582, 598 (1961); Greisman v. Newcomb Hospital, 40 N.J. 389, 403 (1963). But as observed by the Court of Appeals in United States v. American Medical Ass'n, 72 App. D.C. 12, 110 F.2d 703 (D.C. Cir. 1940):
"Organizations and rules which have as their purpose the improvement of conditions in any particular trade or occupation, and the regulation of relations between traders, are, as we have just pointed out, beneficial rather than detrimental to the public interest. But when these same organizations go so far as to impose unreasonable restraints on the operations in their field, they become subject to the *224 prohibition of the Sherman Act. Sugar Institute v. United States, 297 U.S. 553, 597-600, 56 S. Ct. 629, 80 L. Ed. 859." (at p. 712)
The situation before me is similar in significant respects to a combination struck down by the United States Supreme Court in Fashion Originators' Guild v. Federal Trade Commission, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941). In that case members of the Guild refused to deal with retailers who offered for sale garments and fabrics that were copied from originals of Guild members. The Guild contended that this action should be permitted since it was aimed at stamping out a trade evil called "style piracy." The Supreme Court held that the Guild's motive would not save their combination from the Sherman Act, saying:
"* * * the combination is in reality an extra-governmental agency, which prescribes rules for the regulation and restraint of interstate commerce, and provides extra-judicial tribunals for determination and punishment of violations, and thus `trenches upon the power of the national legislature and violates the statute.' Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 242, 20 S. Ct. 96, 44 L. Ed. 136, 148." (at pp. 465-466, 61 S.Ct., at p. 707)
Also see American Med. Ass'n v. United States, 76 U.S. App. D.C. 70, 130 F.2d 233, 249 (D.C. Cir. 1942). Cf. United States v. National Ass'n Real Estate Boards, 339 U.S. 485, 489, 70 S.Ct. 711, 94 L.Ed. 1007 (1950). But cf. Purofied Down Prod. Corp. v. National Ass'n of Bed Mfrs., 201 Misc. 149, 105 N.Y.S.2d 132 (Sup. Ct. 1951).
Defendants contend they have refused to distribute listing information to Grillo and other nonmembers because nonmembers may not be competent or may engage in practices which by Board standards would be unethical. There is no need to consider whether these contentions would have any weight if the real estate business were entirely free of public regulation. See Fashion Originators' Guild v. F.T.C., supra. Here there is a comprehensive scheme of public regulation. N.J.S.A. 45:15-1 et seq. Every broker and salesman must be licensed (sec. 1). The licensing body, the New Jersey Real *225 Estate Commission, is composed of five members appointed by the Governor, each having at least ten years of experience as a broker prior to appointment (sec. 5). No one can apply for a broker's license until he has first served an apprenticeship for two years as a licensed salesman employed by a licensed broker. Applicants for all licenses must furnish evidence of good moral character (sec. 9). Each must pass an examination in order to demonstrate his general education and knowledge of real estate matters (sec. 10). All licenses must be renewed annually (sec. 10), and every licensee is subject to the power of the Commission to suspend or revoke licenses for cause. Section 17 of the act contains a long series of subsections spelling out offenses for which a licensee, if found guilty, may be penalized. In addition to the more particular subsections, there is one empowering the Commission to suspend or revoke a license when the licensee has been found guilty of any conduct which demonstrates "unworthiness, incompetency, bad faith or dishonesty."
It has been held that the State has preempted the regulation of brokers and salesmen engaged in the real estate business. Mogelefsky v. Schoem, 90 N.J. Super. 49, 59 (App. Div. 1966); State v. Stockl, 85 N.J. Super. 591, 599 (Law Div. 1964). Insofar as the Board seeks through its combination to protect the public in real estate dealings, it is proceeding as an extra-governmental body in a preempted field. The grounds stated by the Board do not justify the combination.
I conclude that the Board and its members are engaged in an unreasonable and hence illegal restraint upon trade in violation of the common law.
IV.
The common law on restraints of trade emphasizes the element of public harm produced by the alleged combination. Considering plaintiff's case as one for relief against an illegal combination in restraint of trade is not the only available approach. The concerted refusal of a group of traders to *226 deal with another businessman may also be a private wrong, requiring no showing of harm to the public as a basis for relief.
A line of cases in this State has established the right of a businessman to be protected from unjustified interference with a particular transaction in which he is involved and from which he has reasonable expectations of economic advantage. Louis Kamm, Inc. v. Flink, 113 N.J.L. 582 (E. & A. 1934); Newark Hardware & Supply Co. v. Stove Mfrs. Corp., 136 N.J.L. 401 (Sup. Ct. 1947), affirmed 137 N.J.L. 612 (E. & A. 1948); Louis Schlesinger Co. v. Rice, 4 N.J. 169 (1950); Mayflower Industries v. Thor Corp., 15 N.J. Super. 337 (Ch. Div. 1951), affirmed o.b. 9 N.J. 605 (1952); McCue v. Deppert, 21 N.J. Super. 591 (App. Div. 1952); Geo. H. Beckmann, Inc. v. Charles H. Reid & Sons, Inc., 44 N.J. Super. 159 (App. Div. 1957); Sustick v. Slatina, 48 N.J. Super. 134 (App. Div. 1957); Myers v. Arcadio, Inc., 73 N.J. Super. 493 (App. Div. 1962); Fitt v. Schneidewind Realty Corp., 81 N.J. Super. 497 (Law Div. 1963); Harris v. Perl, 41 N.J. 455 (1964). A defendant may be liable, even though he is a competitor motivated by the desire for profit. The test for liability was set out in Sustick v. Slatina, supra:
"In this area of the law the use of such expressions as conspire, unlawful, malicious, etc., has been criticized as beclouding judgment and clear thinking in the formulation of rules of liability. See Weinstein v. Clementsen, 20 N.J. Super. 367, 371 (App. Div. 1952). Yet a degree of generality in the criteria which will suffice to spell out liability in any given case of this kind is unavoidable. The essence of the cases in this field is that in adjudging whether what the defendant has done is actionable, i.e., not done in the exercise of an equal or superior right, the ultimate inquiry is whether the conduct was `both injurious and transgressive of generally accepted standards of common morality or of law.' Di Cristofaro v. Laurel Grove Memorial Park, 43 N.J. Super. 244, 255 (App. Div. 1957). In other words, was the interference by defendant `sanctioned by the "rules of the game."' 1 Harper and James, op. cit. supra, § 6.11, p. 510; cf. Trautwein v. Harbourt, 40 N.J. Super. 247, 267, 268 (App. Div. 1956). There can be no tighter test of liability in this area than that of the common conception of what is right and just dealing under the circumstances. Not *227 only must defendants' motive and purpose be proper but so also must be the means. Louis Kamm, Inc. v. Flink, supra (113 N.J.L., at p. 589)." (48 N.J. Super., at p. 144)
Our situation differs from the cases just cited. Here there is interference with potential dealings of plaintiff dealings in which he was never involved but with which he might have been connected were it not for his being denied listing information by defendants' combination. These probable expectancies deserve protection from unjustified interference, just as much as relations that have already become somewhat fixed. Disturbance of probable expectancies, just as interference with more finite relations, may take from the entrepreneur the fruits and advantages of his own industry, skill and credit, which it is the policy of this State to safeguard. The general test enunciated in Sustick is applicable here as well. Of course, the "rules of the game" must be considered in the light of these different circumstances.
A concerted refusal to deal which unjustifiably interferes with plaintiff's probable expectancies, in my opinion, falls outside the "rules of the game." The following proposition appears in 4 Restatement of Torts, § 765, p. 42 (1939):
"(1) Persons who cause harm to another by a concerted refusal in their business to enter into or to continue business relations with him are liable to him for that harm, even though they would not be liable for similar conduct without concert, if their concerted refusal is not justified under the circumstances."
See "Developments in the Law - Competitive Torts," 77 Harv. L. Rev. 888, 929-932 (1964). As the Restatement suggests, it is the collective nature of this activity that is objectionable. Concerted activity by business units otherwise independent of each other is a suspect form of conduct. An individual should assume that he will meet the competition of other individual business units. He should not be subject to harmful action of separate entities in combination without good cause. Although Associated Press v. United States, supra, involved a refusal to deal under the Sherman Act, the remarks of Mr. Justice *228 Black are relevant here. Speaking of a combination which he found "bound to reduce their competitor's opportunity to buy or sell the things in which the groups compete," he said:
"Victory of a member of such a combination over its business rivals achieved by such collective means cannot consistently with * * * practical, everyday knowledge be attributed to individual `enterprise and sagacity;' such hampering of business rivals can only be attributed to that which really makes it possible the collective power of an unlawful combination." (326 U.S., at p. 15, 65 S.Ct., at p. 1422, 89 L.Ed., at p. 2013)
Situations which can be classified as concerted refusals to deal causing harm to possible future relations were redressed on other theories in Di Cristofaro v. Laurel Grove Memorial Park, Terwilliger v. Graceland Memorial Park Ass'n, and Falcone v. Middlesex County Medical Soc., all supra.
The combined activity of defendants in this case has already been described and harm to plaintiff found. The justification offered by defendants in response to the charge of an illegal restraint of trade also fails here for the reasons stated in section III of this opinion. As an alternative holding, I conclude that defendants are liable to plaintiff for the private harm done him by their concerted refusal to allow him to participate in the benefits of the multiple listing system.
V.
I come now to the question of what relief would be appropriate in this case.
INJUNCTIVE RELIEF
Plaintiff is entitled to an injunction which will protect him and all other licensed brokers similarly situated against the burden of competing with members of a multiple listing system from which he is excluded.
However, it would be unfortunate for the public as well as for licensed real estate brokers and salesmen if the multiple listing system should be eliminated entirely by order of the *229 court. Accordingly, I will enjoin the operation of the multiple listing service of defendant Board in its present form, but leave it open to the Board to modify its rules and regulations to enable nonmember brokers with offices in the Board's territory to participate in the multiple listing system. Authority for such a judgment can be found in United States v. Associated Press, supra, 52 F. Supp., at p. 375, and 326 U.S., at p. 21, 65 S.Ct. 1416. The following changes, it appears to me, are required: (1) Listing information collected by the multiple listing service shall be made available to licensed nonmember brokers having places of business in the Board's area on the same basis as it is made available to Board members. (2) In order to secure the benefits of the multiple listing system, all brokers, both members and nonmembers of the Board, must comply with Board regulations which require all property listings obtained by them, with certain specified exceptions, to be forwarded to the service for distribution to other participating brokers. (3) The multiple listing service shall receive and distribute listings secured by nonmember brokers in the area of the Board on the same basis as listings obtained by Board members. (4) The service shall be entitled to receive a percentage of the brokerage commission when the sale of a listed property is consummated by a member or nonmember broker. These four points are not intended to rule out the possibility that other changes in the rules and regulations of the Board will be found necessary or desirable when those rules and regulations are reviewed for the purpose of placing Board members and nonmember brokers on an equal footing in the multiple listing system.
The judgment to be submitted may provide a reasonable time for accomplishing such changes as are to be made, and for retention of jurisdiction to pass upon, if need be, whether such changes comply with the views expressed in this opinion.
Although there may be problems in the future concerning participation in the Board's multiple listing system by brokers who have their offices outside of the Board's area, it *230 should be said clearly that I have not considered any such question.
COMPENSATORY DAMAGES
Defendants contend that damages in this case cannot be ascertained without resort to mere speculation and conjecture and, therefore, should not be allowed. I have found as a fact that harm did ensue to plaintiff as a result of the combined activity of defendants. The difficulty of ascertaining with precision how much better plaintiff would have done if he had been a member of the multiple listing service must be conceded. Yet uncertainty as to the measure or extent of damages should not bar recovery. In 25 C.J.S. Damages § 28, pp. 684-688, it is stated:
"The rule as to the recovery of uncertain damages generally has been directed against uncertainty as to fact or cause of damage rather than uncertainty as to measure or extent. In other words, the rule against uncertain or contingent damages applies only to such damages as are not the certain results of the wrong, and not to such as are the certain results but uncertain in amount.
In many cases, although substantial damages are established, their amount is, in so far as susceptible of pecuniary admeasurement, either entirely uncertain or extremely difficult of ascertainment; in such cases plaintiff is not denied all right of recovery, and the amount is fixed by the court * * * in the exercise of a sound discretion * * *."
Our Supreme Court, in Tessmar v. Grosner, 23 N.J. 193 (1957), substantially agreed, saying:
"If the evidence affords a basis for estimating the damages with some reasonable degree of certainty, it is sufficient. Wolcott, Johnson & Co. v. Mount, 36 N.J.L. 262, 272 (Sup. Ct. 1873), affirmed 38 N.J.L. 496 (E. & A. 1875). The rule relating to the uncertainty of damages applies to the uncertainty as to the fact of damages and not as to its amount, and where it is certain that damage has resulted, mere uncertainty as to the amount will not preclude the right of recovery." (at p. 203)
The damages in the instant cause may be ascertained with some reasonable degree of certainty. Plaintiff opened his brokerage office in Plainfield in the middle of 1958 *231 and may fairly be said to have been injured in his business from the beginning of 1959 through mid-1965, the time of the trial of this case. Defendant Board's annual reports show the volume of multiple listed property sold during those years:
Year Volume
1959 .............. $ 8,398,459
1960 .............. 7,915,880
1961 .............. 9,448,169
1962 .............. 10,639,384
1963 .............. 12,812,724
1964 .............. 13,026,680
1965 .............. 5,186,775 (Figure not available. Average for
six-month period 1959-64 used.)
___________
TOTAL ............. $67,428,071
The total broker's commission is usually 6% of the selling price, with 75% of that commission going to the selling broker (when not also the listing broker) according to the Board's rules and regulations. Therefore, selling brokers of the Board may be treated as having earned $3,034,263 (4.5% of $67,428,071) over this 6 1/2-year period. Although the record indicates that there is a great disparity between the different members of the Board in the number of sales made of multiple listed properties, I think it just to assume that plaintiff, if he had participated in the system, would have achieved sales equal to the average of the members of the Board, and would thus have earned additional gross commissions of $54,545 ($3,000,000 divided by 55 members). The proofs show that Grillo had a modest success in the real estate business in the years prior to trial. Gross commissions are subject to salemen's compensation (50% of the gross commission) and to other operating expenses. The Board member who handled the greatest dollar volume through the multiple listing system in 1964 realized a net profit of $24,811 on a gross commission total of $171,500, indicating that after salesmen's commissions, advertising and other expenses are paid, approximately one-seventh of gross commissions remains *232 as compensation or profit for the broker-owner. Grillo gave his own estimate of the cost of doing business as 70% or 80%. This evidence furnishes a basis for taking one-sixth of the estimated total of additional income as net profit. Accordingly, I will award damages to plaintiff in the amount of $9,000. As the injury here has resulted from the concerted activity of all defendants, they are jointly and severally liable for the damages. Any individual defendant who was not a member of the Board during the entire period from 1959 to mid-1965 shall be liable for a proportionate amount of the damages awarded. Counsel should ascertain if any defendants are thus entitled to a reduction in liability and so provide in the judgment to be submitted.
PUNITIVE DAMAGES
Plaintiff's demand for punitive damages must be denied. As stated by Dean Prosser, quoted in Berg v. Reaction Motors Div., 37 N.J. 396, 413 (1962):
"`Something more than the mere commission of a tort is always required for punitive damages. There must be circumstances of aggravation or outrage, such as spite or "malice," or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton.'"
The grounds for imposition of punitive damages were summarized in La Bruno v. Lawrence, 64 N.J. Super. 570 (App. Div. 1960), certification denied 34 N.J. 323 (1961):
"* * * (1) actual malice, which is nothing more or less than intentional wrongdoing an evil-minded act; or (2) an act accompanied by a wanton and willful disregard of the rights of another." (at p. 575)
As already stated, I find no malice in the combined action of defendants, nor was it shown that their activity was carried out in wanton and willful disregard of the rights of plaintiff. Their combination, represented by the multiple listing service, was motivated, at most, by an intent and desire to promote their business.
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336 S.W.2d 748 (1960)
AETNA CASUALTY AND SURETY COMPANY, Appellant,
v.
H. S. MOSS et al., Appellees.
No. 13611.
Court of Civil Appeals of Texas, San Antonio.
June 29, 1960.
Bailey & Williams, James A. Williams, Dallas, for appellant.
Raymond M. Myers, Brundidge, Fountain, Elliott & Bateman, Dallas, for appellee.
MURRAY, Chief Justice.
This suit was instituted by H. S. Moss and Moss Petroleum Corporation, hereinafter *749 called Moss, against the Aetna Casualty and Surety Company, hereinafter called Aetna, on a fidelity bond conditioned to indemnify Moss against loss from any dishonest act of his employees, among whom was Orrie I. Dunkle, hereinafter called Dunkle, seeking to recover the sum of $6,183.25, plus interest, being the proceeds of "tank bottom accumbulations" sold by Dunkle and appropriated to his own use.
The trial was to a jury which answered the five special issues submitted to it favorably to Aetna, but upon motion of Moss judgment was rendered in his favor, non obstante veredicto. Aetna has appealed.
In answer to Special Issue No. 1, the jury found that before 1949 Orrie Dunkle was told by H. S. Moss "to dispose of the basic sediment in oil tanks in any way he could." Appellant contends that the trial court erred in disregarding the jury finding and rendering judgment for Moss, non obstante veredicto, because such finding was supported by the evidence and determined a lack of dishonesty or fraud on the part of Dunkle. The fidelity bond guaranteed repayment for any loss suffered by Moss through any fraudulent or dishonest act or acts committed by any employee, and, of course, if Dunkle was not guilty of fraud or dishonesty, there could be no recovery by Moss. Dunkle had been a long-time employee of Moss, the last few years living in the area near Kilgore, Texas, and working as a superintendent and pumper in the East Texas Oil Fields. Prior to 1949, they had no equipment to take care of accumulations of basic sediment in tank bottoms, as they now have, and it was customary at that time to dispose of it in any way they could. It was at this time that H. S. Moss told Dunkle to dispose of the basic sediment in oil tanks in any way he could. Thereafter H. S. Moss was not active in the East Texas Field, and in 1950 John M. Little, Jr., was employed by Moss as general superintendent of the East Texas Field, and worked out of the Dallas office.
Dunkle testified that in 1947 or 1948, he learned that in disposing of tank bottoms he could obtain some remuneration therefor, and then he began to get money for this basic sediment or tank bottoms whenever a tank was cleaned. He testified that he never attempted to hide this fact from Moss. He containued to follow the usual procedure with regard to the filing of cleanout sheets and sending them to the Dallas office. When it became apparent that Moss was not utilizing the information given on the clean-out sheets and declaring the salvageable oil which should have been charged against the lease as to the allowable set by the Railroad Commission of Texas, Dunkle stopped sending them to Dallas and kept them in his "dog house" on the lease, on a clipboard, hanging on the wall, available for all the world to see. H. S. Moss and Little both testified that they knew nothing about these reports and had never seen them. In 1957, Little came into information which led him to discover that Dunkle had been selling these tank bottoms and appropriating the money to his own use. Over the years these sales had amounted to $6,183.25. On January 3, 1958, Dunkle was fired.
It is not disputed that property belonging to Moss was sold by Dunkle and the proceeds appropriated to his own use. Aetna undertook to secure a finding of the jury that in doing so Dunkle was not guilty of any fraud or dishonesty, because he was authorized to do so. The issue as submitted did not amount to a finding that Dunkle in appropriating these proceeds to his own use did not act fraudulently or dishonestly. The fact that Dunkle was told to dispose of tank bottoms in any way he could did not authorize him to sell them, put the money in his own pocket and not account for it in any way to Moss. The trial court made no implied findings which would aid the issue submitted, but on the contrary granted Moss judgment non obstante veredicto.
When Moss proved that Dunkle had sold his property and appropriated the proceeds *750 to his own use, without Moss' consent, he made out a prima facie case against Aetna upon the fidelity bond, and the defense that at a time when the tank bottoms were worthless H. S. Moss told Dunkle to dispose of them anyway he could, did not by any stretch of the imagination authorize Dunkle to sell these tank bottoms and appropriate the proceeds to his own use. Moss moved for an instructed verdict, which was opposed by Aetna upon the ground that there was an issue of fact as to whether Dunkle had acted fraudulently or dishonestly. Special Issue No. 1, as submitted, is not a finding that Dunkle did not act fraudulently and dishonestly in selling the tank bottoms and appropriating the proceeds to his own use.
Aetna next contends that the trial court erred in disregarding the jury's answers to Special Issues Nos. 2 and 3. In answer to Issue No. 2 the jury found that Moss had actual knowledge "that Orrie Dunkle was disposing of basic sediment for value," and by answer to Issue No. 3, that Moss had such actual knowledge in 1951. These findings are not supported by any evidence. Both H. S. Moss and Little testified they had no actual knowledge that Dunkle was selling tank bottoms and there is no evidence that they did. Aetna points out that both Moss and Little were interested witnesses and therefore the jury was not required to believe their testimony. This is true, but their evidence that they had no such actual knowledge cannot be twisted into evidence that they did have actual knowledge of the activities of Dunkle prior to December, 1957. Neither is the circumstantial evidence sufficient to support the findings of the jury. It creates nothing more than a surmise or speculation that Moss or Little might have had such actual knowledge. Dunkle testified that he sent reports of tank clean-outs to the Dallas office, and such reports as he did not send in he hung upon the wall of his "dog house," where they could be seen by everyone, and that Little was often in his "dog house." These reports did not show that he was selling these tank bottoms and pocketing the proceeds. The evidence shows that Dunkle had the equipment to clean up these tank bottoms without the necessity of cleaning the tanks and disposing of the tank bottoms.
Aetna further contends that the jury having found that Moss had actual knowledge that Dunkle was disposing of these tank bottoms as early as 1951, that Moss' cause of action was barred by the statute of limitations, and that Moss' failure to give proper notice of loss barred recovery. Neither limitation nor failure to give notice was plead and therefore could not have been considered. Rule 93(m), T.R.C.P., reads as follows:
"That notice and proof of loss or claim for damage has not been given, as alleged. Unless such plea is filed such notice and proof shall be presumed and no evidence to the contrary shall be admitted. A denial of such notice or such proof shall be made specifically and with particularity."
The statute of limitations unless plead is waived. Rule 94, T.R.C.P. Mueller v. Banks, Tex.Civ.App., 317 S.W.2d 254; Stanton v. Brown, Tex.Civ.App., 269 S.W.2d 853.
In answer to Special Issues Nos. 4 and 5, the jury found that Moss should have known, in the exercise of ordinary care, as early as 1949 that Dunkle was disposing of basic sediment for value, but these findings do not constitute a defense to this suit. Aetna does not here contend that the jury's answers to Issues Nos. 4 and 5 entitled it to judgment.
The judgment is affirmed.
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242 Md. 405 (1966)
219 A.2d 25
PRESSLEY
v.
WARDEN OF THE MARYLAND HOUSE OF CORRECTION
[App. No. 98, September Term, 1965.]
Court of Appeals of Maryland.
Decided April 28, 1966.
*406 Before PRESCOTT, C.J., and HAMMOND, HORNEY, MARBURY and BARNES, JJ.
HAMMOND, J., delivered the opinion of the Court.
Eugene Pressley was convicted of the crime of robbery with a deadly weapon and sentenced to eight years in the Maryland House of Correction on July 1, 1964. No appeal was taken.
Petitioner originally filed a "Petition for Writ of Habeas Corpus" but, at the suggestion of Judge Harris, agreed that it would be to his advantage to have the petition considered under the Uniform Post Conviction Procedure Act, and pursuant to Maryland Rule Z55 b it was docketed as such on April 1, 1965. The State's answer was filed on April 8, 1965. A hearing was held on July 13 and July 20, 1965, before Judge Carter, and his opinion denying the petition was filed on September 30, 1965. In addition to those contentions which rest on constitutional grounds, petitioner also filed two "Motion[s] for Release by Default."
The first motion contends that petitioner should be released because Maryland Rule BK43 a, requiring the state's attorney to respond to a petition under the Post Conviction Procedure Act within fifteen days after the petition is docketed, had not been complied with. The dates set out above indicate that such an allegation is erroneous and the motion is dismissed. The other motion was filed on September 24, 1965, and contends that Maryland Rule 18 b (a codification of Art. IV, § 23, of the Maryland Constitution which requires that a judge render his decision within two months after the case is argued) has not been complied with. While the word "shall" is used in the Constitution and in the Maryland Rules, and while Judge Carter did not render his decision within two months after the hearing, it has been held that § 23 of Art. IV of the Maryland Constitution is not mandatory, but directory; therefore there is no loss of jurisdiction to pass upon the petition. Myers v. State, *407 218 Md. 49, 51, cert. denied, 359 U.S. 945, 3 L. Ed. 2d 678 (writ of error coram nobis not ruled on until after two months had elapsed). See also Holt v. Warden, 223 Md. 654, 657 (sentence not passed within two months' period); Snyder v. Cearfoss, 186 Md. 360, 370 (ruling on motion for new trial not given until after two months from date of hearing). Petitioner's motion is hereby dismissed. We now turn to the substantive matters.
Petitioner first contends that evidence used against him at his trial was obtained as a result of an illegal search and seizure. Judge Carter correctly concluded that under the circumstances the arrest of petitioner without a warrant was based on reasonable grounds to believe at the time of the arrest that a felony had been committed and that the person arrested had committed the felony. Hopkins and Terry v. State, 239 Md. 517; Hitt v. State, 235 Md. 544; Mulcahy v. State, 221 Md. 413. Petitioner fitted precisely the description broadcast to the arresting officers (including the fact that a suspect was wearing a blue beret) and was picked up on a deserted street within six blocks from the scene of the robbery and four minutes from the time the call was received. It is clear that as an incident of a lawful arrest tangible evidence of the crime can be seized. Johnson, Etc. v. State, 238 Md. 528; Hitt v. State, supra.
Petitioner next contends that his confession was involuntary and evidence of the confession prejudiced the trial judge. Judge Carter examined the record of the trial and found that this was an allegation without foundation in that no confession was admitted into evidence.
Petitioner next contends that he was denied the assistance of counsel during the interrogation and at the preliminary hearing. Judge Carter found as a fact that at the interrogation Pressley was advised of his right to remain silent and to have a lawyer and that no threats or promises were made to him, and that he asserted that he did not need a lawyer. Petitioner's reliance on Escobedo v. Illinois, 378 U.S. 478, 12 L. Ed. 2d 977, would be ill-founded even if the circumstances of his interrogation came within the facts of Escobedo (which they do not); since we have held in Hyde v. State, 240 Md. 661, 666, that "the doctrines of Escobedo were not intended to be, and are not *408 to be, applied retrospectively," and Pressley's conviction became final prior to the decision in Escobedo. The assertion of denial of counsel at the preliminary hearing is likewise without merit because petitioner was not required to plead and did not plead to the charges; and, consequently, no admission of guilt was given at the hearing and later put into evidence at the trial. The circumstances here are such that the preliminary hearing was not a "critical stage" in the proceedings and there is no absolute constitutional requirement that a defendant be represented by counsel at a preliminary hearing. Evans v. Warden, 240 Md. 333; Fabian v. State, 235 Md. 306, 319, cert. denied, 379 U.S. 869, 13 L. Ed. 2d 72.
Petitioner contends lastly that he was represented by incompetent counsel. Judge Carter concluded that there was no truth in any of the specific allegations of error by counsel at the trial. Even if there had been, mistakes by an attorney are not sufficient cause for post conviction relief unless as a result of them the representation was so deficient as to go to the very fairness of the trial. Bryant v. Warden, 235 Md. 658; Hamm v. Warden, 238 Md. 633. Judge Carter concluded, based on the considerable experience of the lawyer in trial work and the record of the trial, that petitioner was properly represented in a fair trial and was in all probability, based on the usual practice of his attorney, advised of his right of appeal. Petitioner furnishes no reason, and none appears to us, why these conclusions are not correct.
Application denied.
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242 Md. 487 (1966)
219 A.2d 808
FALCONE
v.
PALMER FORD, INC.
[No. 355, September Term, 1965.]
Court of Appeals of Maryland.
Decided May 24, 1966.
The cause was argued before HAMMOND, HORNEY, MARBURY, BARNES and McWILLIAMS, JJ.
Joseph A. Mattingly for appellant.
William M. Canby, with whom were Miller, Miller & Canby on the brief, for appellee.
Brief Amicus Curiae filed by Automobile Trade Association of Maryland, Inc. (Buckmaster, White, Mindel & Clarke and Everett L. Buckmaster on the brief); by The Maryland Bankers Association (Venable, Baetjer & Howard, Norwood B. Orrick *491 and Luke Marbury on the brief) and by The Maryland Council of Retail Merchants, Inc. (Frank, Bernstein, Conaway, Gump & Kaufman, Lawrence F. Rodowsky and Frank A. Kaufman on the brief.)
HAMMOND, J., delivered the majority opinion of the Court. HORNEY, J., dissents. Dissenting opinion at p. 500, infra.
The appellant, Falcone, bought a used tractor truck from the appellee, Palmer Ford, Inc., in August 1960. Falcone was either unable or unwilling to pay cash so the sale was on time with deferred monthly payments over a period of three years which were secured by a conditional sales contract which fully met the requirements and specifications of the Retail Installment Sales Law, codified both in Code (1957) and Code (1965 Replacement Vol.), as Art. 83, §§ 128 to 153. The final cash price of the vehicle, after deduction of the cash down payment and the trade-in allowance for an old truck, was $6,742.31. To this was added insurance premiums paid by the seller (as permitted by §§ 129 (6), 131 and 132 of Art. 83) in the amount of $248.75, making "the principal amount financed" $6,991.06. Sec. 132 (a) provides that "the time balance" in an installment sale of a motor vehicle "may include a finance charge and charges for insurance premiums, subject to the provisions of this section." Sec. 132 (b) specifies that:
"The finance charge imposed on the sale of a motor vehicle shall not exceed the following rates:
Class 1. Any new motor vehicle $9 per $100 per year on the principal balance.
Class 2. Any used motor vehicle designated by the manufacturer by a year model not more than two years prior to the year in which the sale is made $12 per $100 per year on the principal balance.
Class 3. Any used motor vehicle designated by the manufacturer by a year model more than two years prior to the year in which the sale is made $15 per $100 per year on the principal balance."
The tractor truck which Falcone bought was in Class 2, which would have permitted a finance charge of "$12 per $100 *492 per year on the principal balance"; however, Palmer Ford charged $7 per $100 per year 21% of the principal balance of $6,991.06, stated to be a finance charge of $1,468.22 because this was the then current rate set by the various financial institutions which bought its conditional sales contracts for large used trucks. The principal balance and the finance charge together amounted to a total "time balance" of $8,459.28, which was stated in the conditional sales contract executed by seller and buyer to be payable in "consecutive monthly installments * * * as follows: 36 @ $234.98" (which would total $8,459.28). The conditional sales contract was assigned by Palmer Ford to The Commerce Investment Company and Falcone duly and punctually made to it thirty-six monthly payments of $234.98, and then sued Palmer Ford for refund of the finance charges of $1,468.22, claiming that it had charged, and Commerce Investment had collected, "more of a finance charge than is allowed by law" and that he had "a right under the remedy provided in Article 83, Section 132, to a forfeit of all finance charges paid or $1,468.22." (Sec. 132 (d) provides that:
"If any seller or holder of the installment sales agreement for a motor vehicle shall collect a finance charge on a motor vehicle greater in amount than the maximum specified in this section, or a service charge, the seller shall forfeit to the buyer all finance charges paid or payable under said agreement unless the overcharge results from a bona fide error in computation which is corrected within sixty days from the date of the installment agreement.")
The basis of Falcone's claim of an overcharge is that § 132 (b) of Art. 83, correctly read, means that the maximum finance charge which he considers and refers to as "interest," although the statute does not is to be figured on a declining principal balance so that as each monthly payment is made, interest then due is deducted and credited, and what remains of the monthly installment is applied to principal and a new principal balance thus arrived at.
Palmer Ford's theory is, first, that the statute contemplates and authorizes installment payments which will aggregate and *493 fully pay the "time balance owed by the buyer to the seller" (§ 129 (10)) which is the sum of (a) the "principal balance" (§ 129 (8)), and (b) the finance charge within the limits set by § 132 (b) stated as a sum in dollars, (the principal balance, being in turn the sum of (a) the unpaid cash balance owed by the buyer to the seller, (b) the cost of insurance provided by the seller, and (c) official fees to be paid by the seller to public officials for recording the papers securing the buyer's obligation) and, second, complementarily, that the "declining balance" technique has no place in installment sales regulated by the Retail Installment Sales Law.
Palmer Ford offered testimony which Judge Shure permitted the jury to receive, over Falcone's objection, that it was the custom in Maryland and nationally to treat the "principal balance" as the sum of the unpaid balance of the cash price, the cost of insurance, and official fees, and the custom in Maryland to compute the finance charge by multiplying the number of years over which the repaying installments are to stretch by the agreed rate so that where, as here, the time was three years and the rate $7 per $100 per year the finance charge customarily would be 21% of the principal balance.
At the close of the testimony offered on behalf of Falcone, Palmer Ford moved for a directed verdict which was refused, and then renewed its motion after all the testimony was in. This motion too was denied, as was Falcone's motion for a directed verdict in his favor made at the close of Palmer Ford's case.
Judge Shure submitted the interpretation of the retail installment sales statutes to the jury and furnished them with photostatic copies of §§ 129, 132 and 152 (the definition section) of Art. 83 for use in their deliberations. The jury returned a verdict for Palmer Ford and Judge Shure overruled Falcone's motion for judgment N.O.V. and entered a judgment for Palmer Ford.
The parties agree that Judge Shure erred in submitting the meaning of the statutes to the jury and Falcone contends that it was improper and erroneous to permit evidence of custom or practical construction. It is established beyond doubt that the construction and interpretation of statutes is for the court *494 and not the jury to decide. Aravanis v. Eisenberg, 237 Md. 242, 259; Bethlehem Steel Co. v. Munday, 212 Md. 214, 220; Emery v. F.P. Asher, Jr., & Sons, Inc., 196 Md. 1; Vogelsang v. Sehlhorst, 194 Md. 413; Belt v. Marriott, 9 Gill 331. It is similarly established that it is necessary and proper to construe a statute only when and where the statute is ambiguous and of doubtful meaning, Height v. State, 225 Md. 251; Pressman v. Barnes, 209 Md. 544, 558, and that it is only when and where construction is necessary that resort should be had to evidence of contemporaneous or practical construction or custom or usage. Armco Steel v. State Tax Comm., 221 Md. 33; Bouse v. Hutzler, 180 Md. 682; Balto. County v. White, 235 Md. 212; 82 C.J.S. Statutes § 357 (1953).
We find the provisions of the Retail Installment Sales Law here applicable and pertinent to be plain and unambiguous and their meaning clearly to be perceived from a reading of the words used by the Legislature. Therefore, although the court erred in not itself construing the statutes and in allowing evidence of practical construction and usage relative to them to be offered, the errors were not prejudicial because the court should have directed a verdict for Palmer Ford as a matter of law.
Falcone's basic argument falls into two parts. First, he contends that unless the court construes the rates specified in § 132 of Art. 83 to mean rates of interest which are subject to the declining balance technique that is, unless the phrase "$12 per $100 per year on the principal balance" used in § 132 be read as meaning "$12 per $100 per year on the unpaid principal balance" Ch. 80 of the Laws of 1954 which added then § 119A now § 132 to Art. 83 of the Code under the subtitle "Retail Installment Sales" to fix "the maximum rates which may be charged in retail instalment sales of motor vehicles, * * * and also providing penalties for overcharges" would be unconstitutional because there would be a variance between the title and the body of the Act. He reaches this conclusion on the premise that the word "rates" in the title must have the meaning and only the meaning of "rates of interest." The word rate has numerous and varied meanings apart from that of a measure of interest, as for example, hotel rates, the *495 rates of a publisher for stories, and as a measure of price as at the rate of so much a ton or a yard. More pertinently and conclusively, the word rates in the title of Ch. 80 of the Laws of 1954 would seem obviously to refer to the schedule of Class 1, Class 2 and Class 3 motor vehicles set forth in § 132 (b). Preceding the specifications of classes, subsection b commences with these words: "The finance charge imposed on the sale of a motor vehicle shall not exceed the following rates." (Emphasis supplied.) There is no substance to Falcone's contention as to the invalidity of the title of Ch. 80 of the Laws of 1954.
Falcone supports the second thrust of his basic argument that the phrase "principal balance" in § 132 of Art. 83 should be read to mean a declining principal sum, the then unpaid principal balance by saying that (1) the general rule is that as much as is necessary of each periodic partial payment on account of an indebtedness is first to be applied to pay the interest then due on the indebtedness and the balance then is to be applied to reduce the principal amount of the indebtedness; (2) if the declining balance requirement is not read into the Retail Installment Sales statutes any seller could, under the maximum finance charge allowed by law, make "nearly double the return on its money as compared with charging interest [presumably at the maximum of $12 per $100 per year permitted] on the unpaid balance or almost 24 percent," which Falcone says "is immoral," because "in Maryland, the general interest rate is 6 percent. Article 49, Section 1, of the Maryland Code, 1957."[1]
*496 The answers to Falcone's contentions are, first, that an actual installment sale, at a price which is both greater than the cash price and in excess of the legal rate of interest on the cash price, is not subject to the usury laws because it is not a loan of money but a sale and, second, that the Legislature clearly gave recognition to this established rule by passing the Retail Installment Sales Law, with specified appropriate safeguards.
In Beete v. Bidgood, 7 Barb. & C. 453, 108 Eng. Rep. 792, where an estate, the cash value of which was sixteen thousand pounds, was sold for twenty thousand eight hundred pounds payable in stated installments (the added four thousand eight hundred pounds would have made the transaction usurious if it had been a loan of money), it was held in 1827 that the case arose "out of a contract for the sale of an estate, and not for the loan of money. * * * [And] in that there was no illegality."
The Supreme Court adopted the same view in 1861 in Hogg v. Ruffner, 66 U.S. (1 Black) 115, 17 L. Ed. 38, noting that to constitute usury there must either be a loan and the taking of usurious interest or the taking of more than legal interest for the forbearance of a debt or sum of money due, and holding:
"But it is manifest that if A propose to sell to B a tract of land for $10,000 in cash, or for $20,000 payable in ten annual instalments, and if B prefers to pay the larger sum to gain time, the contract cannot be called usurious. A vendor may prefer $100 in hand to double the sum in expectancy, and a purchaser may prefer the greater price with the longer credit; and one who will not distinguish between things that differ, may say, with apparent truth, that B pays a hundred per cent. for forbearance, and may assert that such a contract is usurious; but whatever truth there may be in the premises, the conclusion is manifestly *497 erroneous. Such a contract has none of the characteristics of usury; it is not for the loan of money, or forbearance of a debt."
Our predecessors took the same view. Williams v. Reynolds, 10 Md. 57, held that for there to be usury there must be a loan of money and that the sale of a valid promissory note at a discount was not usurious because there was an actual sale and not a loan. Bailey v. Poe, 142 Md. 57, took the same view.
Almost all states recognize and apply this rule. See the discussion in Judicial and Legislative Treatment of "Usurious" Credit Sales, 71 Harv. L. Rev. 1143 (1958), and Usury-Applicability of State Usury Laws to Installment Sales, 62 Mich. L. Rev. 1268 (1964); and see 6A Corbin, Contracts § 1500. Some typical relatively recent cases which are illustrative are: Lincoln Loan Service, Inc. v. Motor Credit Co., Inc. (Mun. Ct. App. D.C.), 83 A.2d 230; Luchesi v. Capitol Loan & Finance Co. (R.I.), 113 A.2d 725; Steffenauer v. Mytelka & Rose, Inc. (N.J. Super.), 210 A.2d 88; Carolina Industrial Bank v. Merrimon (N.C.), 132 S.E.2d 692; Uni-Serv Corp. of Mass. v. Commissioner of Banks (Mass.), 207 N.E.2d 906.
As retail installment sales grew in number throughout the country, courts increasingly took sharper looks at such transactions to make sure that there was a sale in substance and actually rather than a sale in form only which masked a loan of money or forbearance of a debt, and more state legislatures enacted statutes governing retail installment sales which, although recognizing that such sales were not loans subject to the usury laws, limited the amount by which the time price could exceed the cash price and imposed other desirable safeguards for the protection of buyers. See 71 Harv. L. Rev. 1143 and 62 Mich. L. Rev. 1268, both referred to above.
Maryland enacted its Retail Installment Sales Act in 1941 by Ch. 851 of the Laws of that year and added the provisions as to motor vehicles, as we have heretofore noted, by Ch. 80 of the Laws of 1954. Ch. 80 provided that "except as herein specifically provided in this section [132], the provisions of the `Retail Installment Sales Law' shall remain unaffected."
A review of the various pertinent provisions of the Maryland *498 Retail Installment Sales Law discloses clearly that it contemplates and authorizes just what occurred in the case at bar. Sec. 128 of Art. 83 requires every installment sales agreement to be evidenced by a writing executed by both parties and containing "all of the agreements" of the parties. Sec. 129 specifies what such an agreement shall contain and spell out, including (1) the cash price of the goods; (2) any charges for delivery, installation, repair or other services separately stated, if there is such charge; (3) the sum of items (1) and (2); (4) the amount of the down payment; (5) the unpaid balance of the cash price payable by buyer to seller "which is item (1) or item (3), as the case may be, less item (4)"; (6) the cost to the buyer of insurance for which credit is extended him; (7) the amount of official fees, for which the buyer is charged, for recording the written agreement; (8) "the principal balance owed" which is the sum of items (5), (6) and (7); (9) "the finance charge" stated as a sum in dollars; (10) the "time balance" owed by the buyer to the seller, which is the sum of items (8) and (9), and the number of installment payments required to pay it, and the amount and time of each payment.
Sec. 152 contains definitions of terms used. Subsection (j) defines "cash price" to mean the minimum price for which the article may be purchased for cash from the seller by the buyer. "Principal balance" is defined in subsection (1) to be "the amount to be entered as item (8) pursuant to subsection (a) of § 129." "Finance charge" is (subsection (m)) "the amount in excess of the cash price of the goods sold, agreed upon by the seller and the buyer, to be paid by the buyer for the privilege of purchasing goods under the installment sale agreement." (Emphasis supplied.) "Time balance" says subsection (n) "means the amount to be entered as item (10) pursuant to subsection (a) of § 129."
Sections 128, 129, 132 and 152 read together completely deflate Falcone's arguments. The parties signed the writing required by § 128 in full and proper form. In it Falcone agreed to buy the tractor truck and to have title remain with Palmer Ford until it was paid for. Falcone further agreed, as § 129 contemplates and provides, that he owed a principal balance of $6,991.06 (and also agreed as to the amount and character of *499 the various permitted items which together made up the principal balance) and that he owed a finance charge (which by definition was "the amount in excess of the cash price * * * agreed upon by the seller and the buyer, to be paid by the buyer for the privilege of purchasing the goods under the installment sale agreement" (emphasis supplied)) of $1,468.22. Having agreed, as the statute provides in items (8) and (9), that he owed a cash balance of $6,991.06 and a finance charge of $1,468.22, Falcone next agreed by item (10) in so many words, as the statutes provide, that he owed the sum of items (8) and (9) as a "time balance" and that he would pay that time balance of $8,459.28, the sum of items (8) and (9) in thirty-six equal installments of $234.98 each. The law specifies in §§ 128 and 129 (a) (10) that the buyer must agree to pay the time balance no more, no less the most pertinent language being that of item (10) of § 129 (a), when it says that the installment sale agreement shall set out the buyer's agreement as to the amount of the time balance and "the number of installment payments [with amount and time of payment] required to pay it [the time balance]." It is the precise amount of the time balance the act contemplates is to be paid and it is that precise amount that the buyer must agree to pay.
Confirmation of legislative intent that the principal balance is a constant and not a declining amount is furnished by § 138 of Art. 83 which gives the buyer the right to prepay all or any part of "the unpaid time balance" in full before maturity, and provides that the seller must refund to him "a portion of the finance charge" which is to be at least as great a proportion of the "total finance charge" as the proportion of the total of the periodic payments scheduled after the time of prepayment bear to the total original time balance or, alternatively, the amount of the total finance charge figured per month under the number of months scheduled in the agreement multiplied by the number of months "by which the payment of the time balance has been anticipated by the buyer." The refund set up by § 138 is not based on or related to the principal balance (or unpaid principal balance) but on the "unpaid time balance," and the refund contemplated is a finance charge no part of which goes to the reduction of the principal balance at any *500 time. All this not only gives no hint that the Legislature regarded that there would be a declining principal balance but definitely suggests the contrary.
It is to be noted also that the Legislature has, in another situation, shown by appropriate language a recognition of the difference between a constant principal balance and an unpaid principal balance (a declining balance). The Land Installment Contracts Act, Code (1957), Art. 21, § 110, et seq., is an act very similar to the Retail Installment Sales in its requirements of setting out specified items in a certain order and manner and its definition of the final figure as the "principal balance." Sec. 112 of Art. 21 sets a maximum rate of interest but unlike § 132 (b) of Art. 83 provides that the interest on "the unpaid balance" shall not exceed 6% per annum, and immediately thereafter directs an application of the installment payments in the way Falcone argues retail installment sale payments should be applied to create a declining balance.
We have been referred to and have found but one pertinent case decided under a law similar to the Maryland Retail Installment Sales Law. The Minnesota Supreme Court decided in Van Asperen v. Darling Olds, Inc., 93 N.W.2d 690, that their Act did not require computation of the Minnesota "time price differential" (the Maryland "finance charge") to be computed on a declining principal balance.
We find that judgment was correctly entered for Palmer Ford.
Judgment affirmed, with costs.
HORNEY, J., filed the following dissenting opinion.
I agree with the majority in all respects except as to the manner in which the "finance charge" on the "principal amount financed" was calculated. Instead of the seller making a finance charge of 21% for three years on the whole principal amount financed of $6991.06, or a charge of $1468.22, I think the finance charge should have been figured at the rate of $7 (the agreed charge instead of $12 permitted by law) on $6991.06 for one year, on $4660.70 for one year and on $2330.36 for one year for this reason: Since the word "per" as used in *501 § 132(b) of Article 83 ($9, $12 or $15 "per $100 per year on the principal balance") literally means "for each," I believe it was the intention of the legislature that the authorized rate on each class of a financed motor vehicle was to be figured annually on the "principal balance" due as of the beginning of each year the contract was to continue. Calculated in this manner, the finance charge on the principal amount financed of $6991.06 would have been $978.75 ($489.37 on $6991.06 for the first year, $326.25 on $4660.70 for the second year and $163.13 on $2330.36 for the third year), which, when added to the principal amount financed would have amounted to $7969.81 as the "total time balance" payable in thirty-six equal monthly installments of $221.39 each.
I would reverse.
NOTES
[1] Falcone acknowledges there are many legislative exceptions to the basic allowed 6% rate of interest such as the 36% allowed by the Uniform Small Loan Law, Code (1964 Replacement Vol.), Art. 58A, § 16; the 6% "or one-half per cent (1/2%) per month," plus "service charges in advance, for services rendered or to be rendered, and expenses * * * of four dollars ($4.00) or one twenty-fifth (1/25) of the original principal amount of the loan or advance, whichever is greater, on any loan or advance not in excess in original principal amount of five hundred dollars ($500.00); twenty dollars ($20.00) or one-fiftieth (1/50) of the original principal amount of any loan or advance whichever is greater, the original principal amount of which is in excess of five hundred dollars ($500.00)," and the specified delinquent charges, on loans over $300 and up to $1,500 under the Maryland Industrial Finance Law (Code (1957), Art. 11, §§ 163-205, particularly § 196); the one per cent per month interest allowed to credit unions on their loans to members under Code (1957), Art. 11, § 153; and the 4% extra allowed Development Credit Corporations under Code (1965 Supp.), Art. 23, § 428, but says these extra allowances do no more than establish a general legislative intent or pattern that the maximum rate of interest is 12%.
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107 N.H. 159 (1966)
RICHARD G. CURRIER
v.
GROSSMAN'S OF NEW HAMPSHIRE, INC.
No. 5378.
Supreme Court of New Hampshire.
Argued January 4, 1966.
Decided April 29, 1966.
*160 Batchelder & Murphy (Mr. William F. Batchelder orally), for the plaintiff.
Cotton, Tesreau, Stebbins & Johnson and David Bradley (Mr. Bradley orally), for the defendant.
BLANDIN, J.
The accident happened on a clear morning on August 3, 1959, in Campton, New Hampshire. The defendant's truck, traveling northerly, was slowing down preparing to make a left turn when the plaintiff, in his Volkswagen truck, coming up behind the defendant, attempted to pass. After the plaintiff pulled out to do so, he saw cars coming in the opposite direction, and in order to avoid a head-on collision, he swung back to his right colliding with the defendant's truck. The plaintiff claimed that he could not see the cars approaching from the north until he started to pass and that he relied upon a hand signal given by the defendant's driver, who is admitted to be the defendant's agent, that the way ahead was clear. The defendant's operator, denying this, claimed that he gave no hand signals, but that his directional light was on, indicating that he was about to make a left turn. The plaintiff, in turning to his left, could be found to have crossed over an unbroken yellow line. In regard to this, RSA 263:32 provides: "When the single center line highway marking method is used, no operator of a motor vehicle shall, while proceeding along a highway, drive any part of such vehicle to the left of nor across an unbroken painted line marked on the highway . . . except as otherwise hereinafter provided; . . . (3) in case such operator has an unobstructed view and can see the end of the said unbroken painted line."
The plaintiff excepts because the Court did not charge the jury that if the violation of section 32 was induced by the defendant's hand signal, upon which the plaintiff reasonably relied, then the plaintiff would not be barred from recovery. On this phase of the case, the Court charged that "if you find there was a violation *161 of the statute and it was causal, then it could be a basis for a finding of contributory negligence . . . And, of course, if you find that a passing signal was given and the ordinary person of average prudence would have relied on it and acted in accordance with what the plaintiff did, then it would not be a basis for a finding of contributory negligence."
We believe that the Court stated the law accurately and that, in the light of the entire course of the trial, it is reasonably certain that the jury understood it. This is sufficient. Davis v. State, 94 N. H. 321, 323. It was not necessary that the requests be given verbatim (Lynch v. Sprague, 95 N. H. 485, 490), or that a principle once correctly expressed be restated in different phraseology. Sigel v. Boston & Maine R. R., 107 N. H. 8. Such procedures often serve to confuse rather than to clarify the law to the jury.
The plaintiff's exception to the Court's charge, on the grounds that it did not cover the effect of the alleged passing signal with reference to any violation of RSA 263:32, is therefore overruled.
Another contention advanced by the plaintiff is that the admission of the investigating officer's opinion of the cause of the accident, given by his oral testimony at the trial was error. The qualifications of the witness, who had been a member of the State Police force for some twenty-five years prior to the accident, and who in line of duty had investigated many such occurrences, is not open to serious question. Walker v. Walker, 106 N. H. 282. The plaintiff maintains that the opinion was inadmissible, citing in support Concord Railroad v. Greely, 23 N. H. 237. This case merely holds that in matters of common knowledge about which the jury know as much as a witness, an opinion cannot help them and therefore should not be introduced. This familiar principle is sound but inapplicable here, as it could reasonably be found by the Presiding Justice that the officer's testimony, due to his superior knowledge and the investigation he made, might aid the jury. Dowling v. Shattuck, 91 N. H. 234; Zellers v. Chase, 105 N. H. 266. We hold that the testimony was properly admitted within the Trial Court's discretion.
The plaintiff's final exception is addressed to the proposition that a report of the accident to the Motor Vehicle Department, admittedly signed by the plaintiff, was erroneously admitted. Various reasons are given for this contention: that the plaintiff did not write out the statement, that he did not remember signing *162 it, and that he was under sedation when he did sign it. No authority in point is cited to support the plaintiff's position in circumstances similar to those before us. This report contained information which it appears only the plaintiff could have given. The general law appears clear that a written statement signed by a party is admissible, even though he denies saying what it contains. Davis v. Antol, 203 Ky. 273; 31A C.J.S., Evidence, s. 282, p. 712. Also, the fact that he did not write the body of the statement is no bar to its introduction. Fasanelli v. Terzo, 150 Conn. 349.
It was not conclusively established that the plaintiff was incapacitated from making a statement because of medication, and while we have no New Hampshire case squarely in point, the majority view is that his alleged condition goes merely to the weight of the evidence and that the matter is for the jury to decide. Aide v. Taylor, 214 Minn. 212; McCormick, Evidence, s. 240. The inconsistency between his motor vehicle report and the position he took on the witness stand makes the document admissible. (Salvitti v. Throppe, 343 Pa. 642; 4 Wigmore, Evidence (3d ed), ss. 1048, 1053; see Bellavance v. Company, 99 N. H. 10). We accordingly overrule the exception.
What we have said appears to cover all questions briefed or argued, and the trial appearing free from error, the order is
Judgment on the verdict.
All concurred.
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153 Conn. 555 (1966)
STATE OF CONNECTICUT
v.
PETER F. PALKIMAS, JR.
STATE OF CONNECTICUT
v.
JOHN R. MOORE
Supreme Court of Connecticut.
Argued February 1, 1966.
Decided April 13, 1966.
KING, C. J., MURPHY, ALCORN, SHANNON and HOUSE, JS.
*556 Bernard Green, for the appellant (defendant Palkimas).
*557 Louis J. lacovo, for the appellant (defendant Moore).
John F. McGowan, assistant state's attorney, with whom, on the brief, were Otto J. Saur, state's attorney, and Joseph T. Gormley, Jr., and Donald A. Browne, assistant state's attorneys, for the appellee (state).
KING, C. J.
Each of the two defendants was charged in a single count with receiving stolen goods of a value in excess of $250 but less than $2000 in violation of § 53-65 of the General Statutes, quoted in the footnote.[1]
The cases were tried together to the court, and each defendant was found guilty. The sole ground of appeal is that the evidence was insufficient to support the court's conclusion of guilt. Thus, the only question is whether, on the evidence, the court could properly conclude that the state had proven guilt beyond a reasonable doubt.
There was ample evidence that the two defendants, Peter F. Palkimas, Jr., and John R. Moore, together with Ronald Berube, were in Newport, Rhode Island, over the weekend of July 4, 1964; that they went from their homes in Stamford, Connecticut, to Newport, and returned to Stamford, in Berube's car; that the car was seen by a Newport policeman loaded with television sets just before it left Newport about two o'clock in the morning of July 6; and that sets stolen from Jack and Harry's Home and Auto Stores, Inc., hereinafter referred *558 to as the store, in Newport, were found two or three days later in Stamford. One such set was found by the police in the trunk of Berube's car and two others, which the state claimed these two defendants had received, were found in the cellar of Moore's house. Palkimas admitted to the police that he had assisted in placing television sets in the cellar of Moore's home. Neither defendant offered any evidence in explanation of his connection with this recently stolen property.[2]
Since the state saw fit to charge under the receiving statute only, it cannot convict unless it proves the essential elements of that crime. These essential elements differ somewhat from the essential elements in larceny and are well summarized and explained in State v. Pambianchi, 139 Conn. 543, 546, 95 A.2d 695, as follows: (1) The property must have been stolen. (2) It must have been received by the accused with the knowledge that it was stolen. (3) It must have been concealed within the meaning of the law. (4) It must have been received and concealed by the accused with a felonious intent, that is, a criminal intent to deprive the true owner of his property. To the same effect is State v. Alderman, 83 Conn. 597, 600, 78 A. 331.
Under the rule of cases such as State v. Weston, 9 Conn. 527, 529, State v. Raymond, 46 Conn. 345, 346, and State v. Donnelly, 124 Conn. 661, 663, 2 A.2d 214, the possession of property recently stolen, if unexplained and standing alone or without other facts pointing to a contrary conclusion, will justify the trier in drawing an inference that the possessor stole the property, and the inference may *559 be sufficiently strong to warrant a conviction of a charge of theft. State v. Donnelly, supra. But it is important to note that the inference is one of fact and may, but need not, be drawn by the trier. State v. Raymond, supra, 347; State v. Donnelly, supra; 1 Wharton, Criminal Evidence (12th Ed.) § 135; 2 Swift, Digest, p. 315. The soundness of the inference to be drawn involves the probative value of the circumstantial evidence. People v. Galbo, 218 N.Y. 283, 291, 112 N.E. 1041. The probative tendency and force of such circumstantial evidence depends upon its nature and relation to the other evidence in the case. It may justify an inference of theft, or of receipt of stolen goods, largely depending on the other facts and circumstances. It is really a question of logic rather than a question of law. This is true even though, if there are no surrounding circumstances pointing otherwise, the circumstantial evidence tends to point to the commission of the crime of theft. State v. Donnelly, supra.
"Possession of recently stolen property puts the burden of explanation upon one charged with having stolen it.... And the same principle applies to one charged with having received property, knowing it to have been stolen." Commonwealth v. Kelley, 333 Mass. 191, 193, 129 N.E.2d 900. In other words, the circumstantial evidence of possession of recently stolen property raises a permissible inference of criminal connection with the property, and if no explanation is forthcoming, the inference of criminal connection may be as a principal in the theft, or as a receiver under the receiving statute, depending upon the other facts and circumstances which may be proven. See State v. Weston, supra; State v. Raymond, supra; State v. Fredericks, 149 Conn. 121, 125, 176 A.2d 581; Commonwealth v. *560 Ross, 339 Mass. 428, 431, 159 N.E.2d 330; Regina v. Langmead, 9 Cox Crim. Cas. 464, 468. And of course the circumstantial evidence may be found by the trier not to be strong enough to warrant a conviction under either charge. State v. Raymond, supra; People v. Galbo, supra; see also State v. Fredericks, supra, 124.
Our receiving statute is not of the common type. It contains no penalty and, in a sense, is accessorial in its inherent nature. State v. Weston, supra. One convicted under it is punished as if he were the principal thief of the goods which he received, and his punishment is determined under our larceny statutes, in this case under § 53-63 of the General Statutes. State v. Kaplan, 72 Conn. 635, 639, 45 A. 1018. One convicted as a principal thief, whether directly, or indirectly through proof of guilt under our receiving statute, cannot subsequently be prosecuted for the same theft either as a principal or as a recipient of fruits of the theft under the receiving statute. State v. Fox, 83 Conn. 286, 291, 76 A. 302. Thus there can be no double jeopardy or successive convictions. See, for instance, cases such as Milanovich v. United States, 365 U.S. 551, 553, 81 S. Ct. 728, 5 L. Ed. 2d 773.
That the possession of the recently stolen property by these two defendants, which was wholly unexplained, strongly pointed to their criminal connection with the property is not open to question. But they were charged only as receivers and must be convicted, if at all, as receivers. Thus the question is whether the circumstantial evidence, considered in connection with all the other evidence, tended to point to the defendants' guilt under the receiving statute and, if so, whether the evidence was strong enough to warrant their conviction *561 under that statute. State v. Raymond, 46 Conn. 345, 346; People v. Galbo, 218 N.Y. 283, 291, 112 N.E. 1041; 1 Wigmore, Evidence (3d Ed.) §§ 152-55.
As previously noted, there was evidence that both defendants had gone to Newport in Berube's car; that two or three days later they had returned to Stamford in that car; that the car had been seen late at night locked up and filled with television sets in a motel parking lot in Newport; that it left the parking lot in the night; and that the two television sets found in the cellar of Moore's home in Stamford, which were part of a number of sets which Palkimas had participated in placing there, as well as the set found in the trunk of Berube's car, had each been stolen from the Newport store. All this evidence, under the rule of State v. Donnelly, 124 Conn. 661, 663, 2 A.2d 214, is circumstantial evidence tending to prove that the two defendants were actual participants in the theft in Newport, either as principals or as accessories under § 54-196, our general accessory statute, which, if they aided or abetted in the theft, would make them principals. We find no facts, nor has the state pointed to any, indicative of their guilt as receivers rather than as participants in the actual theft. It is the settled rule that one cannot be both a principal thief and a receiver of the same goods. 2 Wharton, Criminal Law and Procedure (Anderson Ed.) § 576; note, 136 A.L.R. 1087, 1088. Under these circumstances, the conclusion of the court that the defendants were proven guilty beyond a reasonable doubt of receiving, which was the only charge in the information, cannot be supported.
Theft, as well as receiving stolen property, is a transitory crime for which the defendants could be prosecuted in this state even though the actual theft *562 or receiving occurred in Rhode Island. State v. Cummings, 33 Conn. 260, 264; State v. Pambianchi, 139 Conn. 543, 547, 95 A.2d 695. Had the state followed the usual course and charged the defendants with theft, they could have been convicted on proof that they either were principal thieves or were receivers under the receiving statute, and evidence of guilt in each capacity could have been offered. State v. Weston, 9 Conn. 527, 529; State v. Ward, 49 Conn. 429, 438; State v. Fox, 83 Conn. 286, 291, 76 A. 302; State v. Weiner, 84 Conn. 411, 412, 418, 80 A. 198. This is possible only because proof of guilt under the receiving statute is proof of guilt as a principal thief of the goods received. State v. Kaplan, 72 Conn. 635, 639, 45 A. 1018. The statute expressly authorizes prosecution of a receiver as a principal in the theft.
Especially where the state charges theft, as authorized by our receiving statute, it is possible to avoid most, if not all, of the confusion and finespun distinctions and technicalities encountered in the application of generally similar statutes which make the receiving of stolen goods a crime wholly separate and distinct from that of theft of the goods received, or which make the receiver an accessory after the fact to the theft rather than a principal in its perpetration. State v. Ward, supra, 439; State v. Kaplan, supra (summarizing the evolution of our receiving statute). See the collection of cases involving receiving statutes of various jurisdictions in an annotation in 136 A.L.R. 1087.
An information in two counts, one charging theft and the other, receiving under the statute, seems to have been used in only one case, State v. Newman, 127 Conn. 398, 399, 17 A.2d 774. See also cases such as Commonwealth v. Kelley, 333 Mass. 191, 129 *563 N.E.2d 900, and Commonwealth v. Ross, 339 Mass. 428, 159 N.E.2d 330.
Here, the state chose, for reasons not apparent, to use a single charge of receiving instead of charging theft and prosecuting for theft as authorized by the receiving statute. This course seems to have been followed in only two other cases, State v. Pambianchi, 139 Conn. 543, 95 A.2d 695, and State v. Fredericks, 149 Conn. 121, 122, 176 A.2d 581. The effect of the state's choice was to limit it to proof of guilt under the receiving statute.
For the reasons already pointed out, we cannot find justification in the evidence for the court's conclusion of the defendants' guilt as receivers. The evidence pointed at least as strongly to an actual personal participation in the theft on the part of each defendant. This accorded with the factual presumption applicable where, as here, there is nothing pointing to guilt as receivers rather than as principal thieves. State v. Donnelly, supra. That the state may well have offered evidence sufficient to warrant a conviction under a charge of theft is immaterial since the defendants were not tried under that charge.
There is error in each case, the judgment in each case is set aside and each case is remanded with direction to render judgment that the defendant is not guilty.
In this opinion MURPHY and SHANNON, JS., concurred.
ALCORN, J., with whom HOUSE, J., concurs (dissenting). The majority correctly holds that "the possession of property recently stolen, if unexplained and standing alone or without other facts pointing to a contrary conclusion, will justify the *564 trier in drawing the inference that the possessor stole the property"; that "the inference is one of fact"; that "[t]he soundness of the inference to be drawn involves the probative value of circumstantial evidence"; and that "the probative tendency and force" of such evidence "may justify an inference of theft, or of receipt of stolen goods, largely depending on the other facts and circumstances." Without indulging in a complete recital of the evidence here, I am satisfied that, in each of these cases, the trial court, applying those principles, could, as it did, properly conclude that the state proved beyond a reasonable doubt the essential elements of the crime of receiving stolen goods as those elements are summarized and explained in State v. Pambianchi, 139 Conn. 543, 546, 95 A.2d 695. The conclusion of the trial court is not unreasonable or illogical or contrary to or inconsistent with the relevant facts, and consequently this court should not intervene to substitute its judgment on the evidence for the conclusion reached by the trier. Arvee Construction Co. v. Ardolino, 144 Conn. 7, 12, 127 A.2d 39; State v. Malm, 142 Conn. 113, 115, 111 A.2d 685; State v. Simborski, 120 Conn. 624, 626, 182 A. 221.
I find no error in either case.
NOTES
[1] "Sec. 53-65. RECEIVING STOLEN GOODS. Any person who receives and conceals any stolen goods or articles, knowing them to be stolen, shall be prosecuted and punished as a principal, although the person who committed the theft is not convicted thereof."
[2] Of course the explanatory evidence may come either from the accused if he chooses to take the stand or from any other competent witness or witnesses.
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50 B.R. 596 (1985)
In re Charles H. CARDONA, Debtor.
Jean AVITTO, Plaintiff,
v.
Charles H. CARDONA, Defendant.
Bankruptcy No. 85-00241-BKC-TCB, Adv. No. 85-0570-BKC-TCB-A.
United States Bankruptcy Court, S.D. Florida.
June 24, 1985.
*597 Terrence Dytrych, North Palm Beach, Inc., for plaintiff.
Gary Gromet, Fort Lauderdale, Fla., for debtor/defendant.
MEMORANDUM DECISION
THOMAS C. BRITTON, Bankruptcy Judge.
Plaintiff seeks exception from discharge for her personal injury, drunk driving claim against the debtor. The debtor has answered and the matter was tried on June 4.
There are no conflicts in the evidence. At 1:45 a.m. on March 7, 1984, while plaintiff was walking to her car in a Boca Raton Holiday Inn parking lot, she was struck from behind by a car driven by the debtor. The debtor's car had just struck, in turn, a concrete curb and two other cars. The debtor admits that he was intoxicated but did not testify. His blood alcohol level was 0.14% and he has pleaded guilty to a DWI charge in County Court.
I find that the debtor was driving the car that struck the defendant, that the debtor caused her injury and that he was legally intoxicated at the time.
Plaintiff's tort action for damages was pending in State court before bankruptcy and the parties have agreed before me that the amount of her damage claim may be fixed in that action and, therefore, need not be determined in this court. I agree, and the statutory bankruptcy stay under 11 U.S.C. § 362(a) is lifted to permit that litigation to proceed.
The threshold question is whether the provisions of § 523(a)(9), which were added by the 1984 amendments to the Bankruptcy Code, Pub.L. 98-353, § 371, are applicable to this claim. With some exceptions not pertinent here, the amendments made by Title III of the 1984 Act:
"shall become effective to cases filed 90 days after the date of enactment of this Act." Pub.L. 98-353, § 553(a). Emphasis added.
*598 The effective date was October 8, 1984. This bankruptcy case was filed on February 1, 1985, after § 523(a)(9) became effective.
At trial, the parties agreed that the amendment is not applicable on the ground that the injury had been sustained seven months before the effective date of the amendatory Act. I disagree.
Section 523(a)(9) is unambiguously applicable as a restriction on discharges granted in bankruptcy cases filed after October 8, 1984. The Fifth Amendment only requires a more restrictive application if the amendment would "eliminate property rights which existed before the law was enacted." United States v. Security Industrial Bank, 459 U.S. 70, 81, 103 S. Ct. 407, 414, 74 L. Ed. 2d 235 (1982). The debtor's entitlement to a bankruptcy discharge is not a property right, but a statutory privilege created by and subject to modification by Congress at any time.
Section 523(a)(9) requires exception of any debt:
"to the extent that such debt arises from a judgment or consent decree entered in a court of record against the debtor wherein liability was incurred by such debtor as a result of the debtor's operation of a motor vehicle while legally intoxicated under the laws or regulations of any jurisdiction within the United States or its territories wherein such motor vehicle was operated and within which such liability was incurred."
Plaintiff's claim falls within those provisions.
Alternatively, plaintiff argues that her claim is excepted from discharge under § 523(a)(6), as a debt for:
"willful and malicious injury by the debtor to another entity."
I agree. I find the injury sustained by the plaintiff to have been caused willfully and maliciously by the debtor Caldarelli v. Callaway (In re Callaway), 41 B.R. 341 (Bankr.E.D.Pa.1984); Prosch v. Wooten (Matter of Wooten), 30 B.R. 357 (Bankr.N. D.Ala.1983).
As is required by B.R. 9021(a), a separate judgment will be entered declaring that plaintiff's personal injury claim sustained March 7, 1984 is excepted from discharge under 11 U.S.C. § 523(a)(9) and (6). At the joint suggestion of the parties, the bankruptcy stay is lifted under § 362(d) to permit the parties to fix the amount of those damages by judgment in any appropriate forum. Costs may be taxed on motion.
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336 S.W.2d 113 (1960)
Ruby HARRIFORD, Guardian, Appellant,
v.
Willie HARRIFORD, Respondent.
No. 23058.
Kansas City Court of Appeals, Missouri.
June 6, 1960.
*115 Leon G. Kusnetzky, Kusnetzky & Fridkin, Kansas City, for appellant.
Claude L. Schenck and R. A. Kelpe, Kansas City, for respondent.
CROSS, Judge.
This appeal is from a judgment of the Circuit Court of Jackson County, Missouri, restoring respondent, Willie Harriford, to mental competency. Appellant, Ruby Harriford, is respondent's wife and guardian.
Appellant's brief is not in compliance with Rule 1.08 (present Rule 83.05, V.A.M.R.). It does not contain a fair and concise statement of the facts relevant to the questions for determination. The appeal will be considered in the exercise of our discretion, for the reason that in proceedings of this nature, "the state, as parens patriae,the community,society,has an interest, both to protect the insane person and to protect the public from possible injury and to the end that such person may not, through mental incapacity, waste his estate and become a charge upon the public". State ex rel. Wilkerson v. Skinker, 344 Mo. 359, 126 S.W.2d 1156, 1161, 122 A.L.R. 532.
Our review of the evidence discloses that Willie Harriford, 66 years of age, born and reared in rural Texas, began federal employment in 1921 as a meat inspector. After 32 years of commended service, he retired in 1953. He is a member of the Masonic Lodge and a member and trustee of the Trinity AME Church.
Appellant guardian, 47 years of age, a beauty operator by trade, met and married Harriford in 1948. The marriage was her third matrimonial union. The only available details of the courtship are of a financial nature.
Harriford had bought a residence on Benton Boulevard in Kansas City, Missouri, in 1947, and conveyed it to his grandson, Willie Lloyd Harriford, Jr., reserving in himself a life estateall before the marriage in 1948.
Ruby, while looking for a rental house, learned of the Benton Boulevard property, met Harriford, and proposed to rent the place. Harriford declined, informing her the property was not in his name, but was in his grandson's name. After Ruby "prevailed and kept on prevailing", he "finally decided to let her have the place".
After a conversation in which Harriford told Ruby "she couldn't come in on that (the Benton) place", and Ruby replied, "I don't care whose name its in, all I want to do is get married", the marriage took place.
In 1951, Harriford purchased a parcel of real estate at 1614 North Tenth Street, Kansas City, Kansas, consisting of a two-unit apartment house and business building combination. Title was taken "in both of us".
Much of the evidence concerns Harriford's state of physical health, operations and complaints. Until retirement, his health was such that he missed very few days from work, although he was chronically afflicted with migraine headaches. After retirement, the migraine persisted, with increased severity, and he suffered *116 other afflictions. Seeking relief he consulted several doctors and clinics and entered certain hospitals.
The marriage was relatively trouble free until, in 1956, Ruby pressed Harriford to retake the Benton residence from the grandson, and convey it to her. The grandson refused to reconvey, whereupon she "became angered". Harriford proposed divorce, but she opposed such action.
Harriford voluntarily entered Neurological Hospital for treatment on January 31, 1957. While he was forcibly confined there, Ruby filed insanity proceedings against him in the Probate Court of Jackson County. In Harriford's absence, he was adjudged to be of unsound mind and incapable of managing his affairs, and Ruby was appointed his guardian. She took possession of all his property and confined him in the State Hospital at St. Joseph. Shortly thereafter, he was "paroled to Ruby", but went to live with a brother in Kansas City, Kansas.
Harriford filed restoration proceedings in the Probate Court on September 4, 1957, and on December 2, 1957, its judgment restored him to competency and discharged Ruby as his guardian. She immediately appealed from the judgment. Trial of the cause in the circuit court began September 26, 1958, and was to the court, upon waiver of a jury by Harriford and the appealing guardian.
Harriford testified relative to his physical illness, physicians consulted, treatment, operations and hospitalization. He denied any violence, threats, or any family insanity. He testified that Ruby had all his property, "everything I got", including his bank account, the Benton Boulevard residence, the income from it, his automobile, which she was using, and some of his clothing.
Harriford's sanity and competency to handle his own affairs were attested by thirteen lay witnesses, including friends, neighbors, his minister, fellow church members, church trustees, two sisters and a brother. These witnesses testified they had known Harriford for many years, had seen and talked to him frequently and regularly, that he was normal, talked sensibly, knew the extent and nature of his property and was well qualified to look after his affairs.
On behalf of Harriford, Dr. Marvin L. Bills, a neurologist, Dr. L. Virgil Miller, a physician and surgeon, Dr. Carl A. Adams, a chiropractor, and Dr. John Joseph O'Hearne, a psychiatrist, testified that Harriford was of sound mind and capable of managing his affairs. None of the foregoing witnesses had seen him after October 11, 1957.
Dr. John J. O'Hearne had examined Harriford on October 11, 1957, at the request of the Judge of the Probate Court of Jackson County, Missouri, and submitted a report filed and considered in the restoration hearing in the probate court. Called as a witness by Harriford at the trial below, Dr. O'Hearne testified that although the examination of October 11, 1957 evidenced no hallucinations, delusions, psychosis or organic brain disease, he was unable to diagnose Harriford's present condition. The court, on appellant's oral motion, then appointed and directed Dr. O'Hearne to re-examine Harriford.
On April 24, 1959, Dr. O'Hearne was recalled as a court appointed physician and testified that he had consulted hospital records, secured pertinent history, and had examined Harriford as instructed, from which he formed and held the opinion that Harriford was then competent, able to manage his affairs and to look after his property and himself.
The evidence on behalf of appellant consisted of testimony given by herself, a friend, a psychiatrist and a psychologist. Ruby testified concerning Harriford's illnesses and treatment, his confinement in the State Hospital at St. Joseph and his "parole" to her; that he separated from her, once struck her, frequently threatened to kill her, cried "all the time", "cried *117 over the telephone", carried a loaded shotgun in his car; and that he was incapable of managing his affairs.
Ruby's friend, Marguerite Graham, testified that she saw Harriford cry once, never saw any violence from him, and had heard him talk concerning his ailments. The witness stated no opinion as to his mental competency.
Dr. Rita Wetzel, the psychologist, and Dr. Paul Hines, the psychiatrist, both employed by Neurological Hospital, testified to opinions negativing Harriford's capability of managing his affairs. Dr. Wetzel had not seen Harriford for fifteen months. Nineteen months had elapsed since Dr. Hines had seen him.
Appellant charges the trial court with error in finding the issues for respondent and adjudging him restored to sanity and capable of managing his affairs, complains that such findings and judgment are contrary to the greater weight of the evidence, and urges that the judgment should have been against respondent.
In determining these assignments, it devolves upon us to review the case upon the law and all the evidence, under the provisions of Section 510.310, V.A.M.S. (Rule 73.01), make independent findings of fact, and determine where the preponderance of evidence lies, giving due regard to the trial court's opportunity to observe witnesses and judge their credibility. Although the trial court's findings are not here binding, its judgment will not be set aside in the absence of clear error. Under such principles this court will either affirm the judgment below or direct the entry of such judgment as justice requires.
The sole issue of fact is whether Willie Harriford was a person of sound mind and capable of managing his affairs at the time of trial. Respondent's mental condition and capability at any prior time are not in issue, and evidence relating to prior events, statements and conditions will be considered only with due caution and in accordance with established rules of evidence.
As evidence for respondent, the testimony of thirteen non-professional witnesses is before us, all tending to establish that he was restored to sanity at the time of trial, showing their regular and frequent association with him continuously to the trial, and establishing their opportunity to observe and know the subject matter of their testimony. Respondent's four medical witnesses were not so fortunately qualified, as no one of them had seen him after October 11, 1957.
Appellant is almost without evidence on the contested fact issue. Her own testimony, excluding her accusation that respondent once struck her, is limited to the time before he left her, which appears to be in June, 1957. Marguerite Graham, who saw respondent no later than June, 1957, gave no testimony of any substance on the issue. The testimony of appellant's professional witnesses has little weight, based as it is on observations made fifteen and nineteen months before the trial.
The only medical testimony in the case having material bearing on the issue of respondent's mental condition is the evidence of Dr. O'Hearne, given as an officer of the court and after current examination.
We find that respondent has sustained his burden of proof, and that the credible evidence in the trial below preponderates decisively in his favor. Specifically, on the defined issue, we find that respondent is a person of sound mind and is capable of managing his own affairs and property. Therefore, we hold that the trial court's findings were in accordance with the evidence, and were for the right party.
Appellant contends error was committed by the appointment of Dr. O'Hearne as the court's medical witness to examine respondent. However, appellant made no *118 objection to the court's action. In fact, the appointment was made in response to a motion orally made by appellant and sustained by the court. Appellant actively cooperated in carrying out the examination. It is not shown that Dr. O'Hearne was other than impartial. We find no merit in this contention of appellant.
Appellant also urges that the court erred by admitting Dr. O'Hearne's report in evidence. The transcript does not recite that the report was so admitted. It shows only that the court marked the report as an exhibit, and that it was filed completely without objection. Even if it had been read and considered by the court, no injury arose. The report was almost identical, in substance and import, with Dr. O'Hearne's testimony. Again, we find no merit in appellant's contention.
Appellant's final assignment of error is: "The Court erred in overruling guardian's motion for examination of incompetent because the Court refused to permit guardian to have a doctor of her choice examine the incompetent". It is predicated upon the inaccurate assumption that the court overruled the motion. The record is void of such action by the court. Appellant did present such motion, in writing, before introducing evidence, and the court deferred action until the conclusion of evidence. The motion was not again presented for ruling but was abandoned by appellant when she moved orally, at the conclusion of testimony, that "the court have Mr. Harriford examined by an institution * * *".
Aside from the fact the court did not deny the motion (as assumed in the assignment of error), the court had reasonable discretion to grant or deny appellant's application for an examination of her ward.
44 C.J.S. Insane Persons § 55, page 154, states, "It is not error to deny an application to require the petitioner to be examined by a particular physician selected by persons opposing the discharge".
The granting or denial of a physical examination by one party of the other under Section 510.040 rests "within the discretion of the trial court". Enyart v. Santa Fe Trail Transportation Co., Mo.Sup., 241 S.W.2d 268, 269; Grimm v. Gargis, Mo., 303 S.W.2d 43.
We find that the court did not overrule appellant's motion for an examination of respondent, and rule that no error was committed by the court as contended in the final assignment.
Finding no error before us, and in accordance with our foregoing determinations under the evidence and the law, the judgment is affirmed. It is so ordered.
All concur.
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336 S.W.2d 861 (1960)
CITY OF LAMESA, Appellant,
v.
Myrtle HUTCHINSON, Appellee.
No. 3551.
Court of Civil Appeals of Texas, Eastland.
June 17, 1960.
Rehearing Denied July 8, 1960.
*862 R. Stansell Clement, Lamesa, Vaughn Wilson, Lubbock, for appellant.
Huff, Splawn & Bowers, Lubbock, for appellee.
*863 WALTER, Justice.
Myrtle Hutchinson, a widow, filed suit against the City of Lamesa for damages for the wrongful death of her husband, H. B. Hutchinson. The city pleaded contributory negligence, assumed risk, unavoidable accident and also pleaded it was engaged in the performance of a governmental function at the time of Hutchinson's death and was, therefore, not responsible for the negligent acts of its agents and employees in the performance of said governmental functions. Based on the verdict and a stipulation of the parties, judgment was entered for the plaintiff for $29,400. The city has appealed from such judgment, contending the court erred (1) in overruling its special exceptions (2) in overruling its motion for an instructed verdict, and its motion for judgment non obstante veredicto, and (3) in rendering judgment based on the jury's answers to the lookout and failure to warn issues because there was no evidence to support them and that said answers are against the great weight and preponderance of the evidence. The city also contends the court committed fundamental error in rendering judgment against it because the jury found the deceased's death was caused by the negligence of a fellow servant. It also contends the judgment is excessive.
The appellee has a point that the court erred in failing to give her $1,000 as found by the jury for conscious pain and suffering of the deceased prior to his death.
The record discloses that H. B. Hutchinson, the deceased, was employed in the street department of the City of Lamesa and drew his salary from the street department; that on the day of his death Hutchinson had been working on a truck that belonged to the street department, and after one of the city's pickup trucks had failed to pull it out, a dozer owned and operated by the city was chained onto said truck and pulled it out of the mud; that Hutchinson was the person who did all the hitching and unhitching with the chain; that after Hutchinson unhitched the chain from the dozer and while in the act of unhooking the chain from the truck, the truck driver started forward and ran over Hutchinson, inflicting injuries which caused his death. It was stipulated that the city paid Hutchinson's doctor, hospital and funeral expenses. The record shows that before these bills were paid, the city manager made a complete investigation of the accident. The city manager testified that the work Hutchinson was doing on the day of his accident was 100% for the benefit of the people of Lamesa. The truck driver testified as follows:
"Q. When the dozer came over, did it back up to the truck? A. Well, he drove south and then backed up.
"Q. And, of course, Shorty hooked the chain, is that right, is correct, to the dozer? A. Yes.
"Q. And then what happened, if anything? A. He pulled it out on level ground and stopped.
"Q. And then what happened? A. He taken the chain off the bulldozer, the drawbar.
"Q. All right. Then what happened, if anything? A. Well, Bill waved for me to pull the truck up to where we could get the chain off the truck.
"Q. Where was Shorty? A. When I seen him unhook the chain off the bulldozer he stepped back out of the way, and I got down off the fender and walked to the front bumper and looked to see if he was under the truck, and he wasn't.
"Q. And you got back in the truck? A. Yes.
"Q. Did you drive it up? A. Yes.
"Q. Then what happened, if anything? A. Well, when I drove up I cut the motor off and walked behind the truck and I seen him laying over there in some mud and water.
"Q. Which way did you drive the truck? A. I drove a northeast course.
*864 "Q. Did you drive it straight or cut the wheels? A. Cut the wheels to the northeast.
"Q. Then you got out and found him? A. Yes."
Our Supreme Court in the case of the City of Houston v. Shilling, 150 Tex. 387, 240 S.W.2d 1010, 1011, 26 A.L.R. 2d 935, has stated the rule to be followed by us in deciding this case, as follows: "As stated in City of Amarillo v. Ware, 120 Tex. 456, 40 S.W.2d 57, 60, `the rule is recognized that a municipality is exempt from liability when it performs a duty imposed upon it as the arm or agent of the state in the exercise of a strictly governmental function solely for the public benefit. That the exemption of a governmental agency from liability pertains only to those acts or functions which are performed as the agent of the state in furtherance of general law for the interest of the public at large, as distinguished from those acts and functions intended primarily for the benefit of those within the corporate limits of a municipality." This rule is well settled. It is in the application of this rule to a particular fact situation that the difficulty arises.
We have concluded that the work which Hutchinson was performing on the date and at the time of his fatal accident was not a duty imposed upon the city as an arm or agent of the state in the exercise of a strictly governmental function solely for the public benefit. City of Houston v. Shilling, 150 Tex. 387, 240 S.W.2d 1010, 26 A.L.R. 2d 935; City of Wichita Falls v. Phillips, Tex.Civ.App., 87 S.W.2d 544. We hold the evidence failed to establish the hauling of brush and tree limbs and grass from the streets and alleys of the city was solely for the public health. It is likewise apparent that the work being performed by Hutchinson for ten or fifteen minutes prior to and at the time of his fatal accident, namely, that of hitching and unhitching the two chain to and from the truck and the dozer had nothing to do with public health and could not be classified as a duty imposed upon the city as an arm or agent of the state in the exercise of a governmental function. The work which Hutchinson was performing on that day and at the time of his fatal accident was primarily for the benefit of those within the corporate limits of the city and was, therefore, proprietory and not a governmental function. In City of Fort Worth v. Wiggins, Tex.Com.App., 5 S.W.2d 761, 764, the court said: "Of course, in a general sense every function of a municipal corporation is in the interest of, and as an agent for, the public, and therefore governmental in its nature. But it is not in this broad sense that the classification exists * * *. We take it to be the true rule, if the act or function involves, in any substantial degree or to any material extent, the serving of its own inhabitants, and therefore private purposes, in respect not undertaken by general law, that liability for negligence exists." In other words, if it can be said that the cutting of the weeds served both the public health and the maintenance of the streets, then the city will be liable for the negligence of its employee engaged in such cutting. See City of Wichita Falls v. Mauldin, Tex.Com.App., 39 S.W.2d 859; City of Amarillo v. Ware, 120 Tex. 456, 40 S.W.2d 57.
We will not burden this opinion with a detailed account of the evidence on the issues of failure to warn and failure to keep a proper lookout. We are of the opinion that the record contains some evidence of probative value which supports the jury's findings on these issues.
We have considered all the evidence and are of the opinion the jury's answers to the failure to warn and failure to keep a proper lookout issues are not against the great weight and preponderance of the evidence.
The appellant's point that the court committed fundamental error in rendering judgment against it because the jury found that Hutchinson's death was due to the *865 negligence of a fellow servant cannot be sustained. Our Supreme Court in a Per Curiam opinion in the case of McCauley v. Consolidated Underwriters, 157 Tex. 475, 304 S.W.2d 265, 266, had the following to say with reference to fundamental error. "Since the Rules make no provision for consideration of errors apparent on the face of the record, the concept of fundamental error is much narrower than it was under Article 1837, and many errors formerly treated as fundamental may not be so regarded now. The majority opinion in the Ramsey case [Ramsey v. Dunlap, 146 Tex. 196, 205 S.W.2d 979,] does not attempt to give an all-inclusive definition of the term, but holds that an error which directly and adversely affects the interest of the public generally, as that interest is declared by the statutes or Constitution of our State, is fundamental. When the record affirmatively and conclusively shows that the court rendering the judgment was without jurisdiction of the subject matter, the error will also be regarded as fundamental." We hold appellant's point does not present fundamental error. If we consider this point as an ordinary error, it would fail because it was not incorporated in the appellant's motion for a new trial as required by Rule 374, Rules of Civil Procedure. The court in the City of Wichita Falls v. Phillips, Tex.Civ.App., 87 S.W.2d 544, 545, held: "Since the defense of fellow-servant was not urged in defendant's pleading nor a request made for a submission of that issue to the jury, this assignment must be overruled, independently of the issue whether or not the relation of fellow-servant did in fact exist. Article 2190, R.C.S. of 1925 (as amended by Acts 1931, c. 78, § 1 [Vernon's Ann.Civ.St., art. 2190]); Ray v. Pecos & N. T. Ry. Co., 40 Tex. Civ. App. 99, 88 S.W. 466; Thurber Brick Co. v. Matthews, (Tex.Civ.App.), 180 S.W. 1189; San Antonio Traction Co. v. Emerson, (Tex.Civ.App.), 152 S.W. 468, and decisions there cited."
Appellee's point that the court erred in failing to enter judgment on the jury's verdict awarding her $1,000 for conscious pain and suffering of the deceased from the time of his accident until his death must be sustained. The deceased was taken to the hospital about 10:00 in the morning and died about 2:05 that afternoon. X-rays revealed that he sustained a crushing injury to his pelvis, hip and backbone. No objection was made to this testimony. The record reveals no objections were made to the issue submitted to the jury on pain and suffering. The appellant filed a motion for judgment non obstante verdicto wherein it requested the court to deny a recovery for pain and suffering because there were no pleadings to support same. The court sets out in his judgment that he is denying appellee the $1,000 as found by the jury to the conscious pain and suffering issue because the appellee's pleadings were not sufficient to authorize the submission of said issue to the jury. Where issues which are not raised by the pleadings are tried by express or implied consent of the parties they shall be treated in all respects as if they had been raised by the pleadings. R.C.P. 67. Appellant contends that this court cannot consider appellee's point because the appellee filed no objections to the trial court's judgment. R.C.P. 324 provides that a motion for new trial shall not be a prerequisite for an appeal where "a judgment is rendered or denied non obstante veredicto or notwithstanding the finding of the jury on one or more special issues". "Where a judgment is rendered notwithstanding the finding of the jury, the appellee in order to have a prejudicial error committed against him at the trial considered by the appellate court must file points of error. Such points, however, need not be embodied in the motion for new trial. He may present them in his points of error in his brief." 3 Tex.Jur.2d 461.
We hold the appellee was not required by the rules to file a motion for new trial or complain about the trial court's judgment in order to appeal from that part of the judgment which denied her a recovery *866 of $1,000 for conscious pain and suffering of the deceased because the trial court rejected the jury's finding, and entered a judgment notwithstanding said jury's finding. See Great American Indemnity Co. v. Meyer, Tex.Civ.App., 285 S.W.2d 276; and Smock v. Fischel, 146 Tex. 397, 207 S.W.2d 891. The judgment of the trial court is reformed by adding $1,000 to the amount of the judgment.
We have considered all of appellant's points and find no merit in them and they are overruled.
The judgment is reformed and as reformed, affirmed.
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219 A.2d 846 (1966)
Leona E. SCHRAMM, Petitioner,
v.
PHYSICAL THERAPISTS EXAMINING BOARD of the District of Columbia, Respondent.
No. 3391.
District of Columbia Court of Appeals.
Argued March 21, 1966.
Decided June 1, 1966.
Rehearing Denied June 14, 1966.
*847 G. William Hammer, Falls Church, Va., for petitioner.
David P. Sutton, Asst. Corp. Counsel, with whom Milton D. Korman, Acting Corp. Counsel, and Hubert B. Pair, Asst. Corp. Counsel, were on the brief, for respondent.
Before HOOD, Chief Judge, and QUINN and MYERS, Associate Judge.
QUINN, Associate Judge.
Petitioner seeks review of respondent's denial of her application for registration as a physical therapist without examination pursuant to Code 1961, § 2-458 (Supp. V, 1966). This statute requires the Examining Board to register without examination an applicant who
"* * * presents evidence satisfactory to the Commissioners that she was * * * practicing physical therapy in the District of Columbia for a period of two years immediately preceding the effective date of this subchapter, and that she (1) has graduated from an approved school of physical therapy listed in the register of approved schools or (2) received comparable training or experience in the practice of physical therapy as determined by the Commissioners. * * *" (Emphasis added.)
In September 1963 respondent rejected petitioner's application without a hearing, but on appeal we remanded for a proper hearing in accordance with our decision in Corbett v. Kinlein, D.C.App., 191 A.2d 246 (1963). Following the hearing held on February 26, 1965, at which petitioner alone testified as to her qualifications, respondent found that she did not qualify under the statute, and again rejected her application. It is from this denial that petitioner appeals.
It is a fundamental principle of administrative proceedings that the burden of proof is on the proponent of a rule or order. 2 Am.Jur.2d Administrative Law § 391 (1962); 73 C.J.S. Public Administrative Bodies and Procedure § 124 (1951); accord, Federal Administrative Procedure Act, 5 U.S.C.A. § 1006(c). The statute involved herein likewise speaks of registration of an applicant "who presents evidence" of certain qualifications. It is *848 this burden of proof with which we are chiefly concerned.
Petitioner testified that her formal education ended with high school, and no claim was made that she "graduated from an approved school of physical therapy." It was therefore necessary for her to satisfy the Board that she had received "comparable training or experience." As noted above, the only evidence presented to the Board was her own testimony, and while it is generally true that uncontradicted testimony, even of an interested party, may not be disregarded and may, in some instances, be sufficient to prove a case, we feel that something more was required here. Indeed, since the purpose of registration is the protection of the public from incompetent practitioners, this public interest requires that something more than an applicant's self-serving declarations be presented to the Board as evidence. See S.Rep.No. 823, 87th Cong., 1st Sess. 2 (1961).
Petitioner argues, however, that the "grandfather clause," which requires two years' practice in the District, contains the standard applicable to her. While we may agree that the purpose of such a clause is to establish a standard for licensing without examination those who have acceptably followed a profession for a period of years, a careful reading of Section 2-458 clearly shows that merely satisfying this clause does not satisfy the statute. Petitioner still had the burden of proving that although she did not graduate from an approved school, she received "comparable training or experience." We cannot say that she met this burden by presenting no evidence other than her own recitation of her qualifications.
One further point deserves mention. Petitioner asserts that she did not receive a fair and impartial hearing because (1) she was questioned by both the Assistant Corporation Counsel and the Board, (2) the Board's questions amounted to an "examination," and (3) the Board had previously determined that she was not qualified. We are unable to agree.
It would be unreasonable to rule that Board members may not question an applicant after she has been cross-examined by counsel. Section 2-456 specifically gives them such a right. Their questions, however, should not take the form of an examination. Sherman v. Physical Therapists Examining Board, D.C.App., 208 A.2d 728 (1965). The record discloses that the overwhelming majority of the questions posed by the Board were concerned with either clarifying petitioner's testimony or eliciting further information as to her training and experience. This type of questioning is not proscribed.
Finally, it cannot fairly be said that the Board's prior denial of petitioner's application was per se prejudicial to her. We find no evidence that the Board had predetermined the issues involved or that the hearing was not fair and impartial.
Affirmed.
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336 S.W.2d 125 (1960)
Ethel RANDALL, Appellant,
v.
WESTERN LIFE INSURANCE COMPANY, Respondent.
No. 23129.
Kansas City Court of Appeals, Missouri.
June 6, 1960.
*126 Southall & Southall, Kansas City, for appellant.
Ayers Blocher, Kansas City, for respondent.
CROSS, Judge.
Plaintiff sues to recover death benefits under a $500 life insurance policy issued by defendant on the life of her husband, George Lee Randall, who died June 20, 1957. The cause was tried to the court upon waiver of a jury. The court found the issues in favor of defendant, but entered *127 a judgment for plaintiff in the limited sum of $16.60, representing a return of premiums which defendant had deposited in court. Plaintiff has appealed.
Plaintiff and defendant are in substantial agreement on the facts. Defendant is a Missouri insurance company, organized under the stipulated premium law, Chapt. 37, Art. IV, RSMo 1929. The instrument in suit is a twenty-year term, non-participating life policy issued on April 1, 1943 in consideration of a monthly premium of $1.66, and designates plaintiff as beneficiary.
The policy provides (1) that it shall become void upon default in payment of any premium; (2) a thirty-one day grace period, without interest charge, within which death benefits are payable; (3) for reinstatement on written application within one year after premium default, subject to satisfactory evidence of insurability and payment of delinquent premiums, with interest.
All premium installments were paid prior to August 1, 1955. The premium due on that day was not paid and no payment was made until November 1, 1955, on which day plaintiff tendered and defendant accepted the sum of $4.98. The issues before us stem primarily from divergent contentions of the parties as to the legal allocation of this sum in paying premiums.
Admitted in evidence were three written applications for reinstatement of the policy, in which defendant claims material misrepresentations were made as to insured's condition of health. Plaintiff says that any misrepresentation, if made, was immaterial, as the policy was never in default after November 1, 1955.
Insured was an inmate of the Veterans Hospital at Wadsworth, Kansas, from March 12, 1956, to June 3, 1957. Plaintiff testified that to the best of her knowledge, her husband was hospitalized for arthritis and that she did not know he had cancer.
The official certificate of insured's death is in evidence. It certifies that George Lee Randall died June 20, 1957, and that the disease or condition directly leading to his death was carcinoma of the rectum and metastasis. No other evidence touches upon the cause of insured's death.
Upon plaintiff's demand for payment of death benefits, defendant denied liability on the ground that the policy was not in effect. After suit was filed, defendant tendered into court the sum of $16.60 as a return of premiums.
Plaintiff first and principally contends that the judgment is contrary to the evidence and the law, because (1) a new contract and premium schedule arose by reason of premium payments made November 1, 1955, in the sum of $4.98; (2) applications for reinstatement were improperly admitted and not material; and (3) the defense of alleged misrepresentation was not available, as defendant had not deposited in court all premiums received on the policy.
In resolving these questions, the following policy clause will be considered: "If any premium or installment thereof shall not be paid on the day when due, this policy shall become void without notice from the Company".
Plaintiff says, "the policy lapsed on 8-1-1955 and was void thereafter until a payment was made 11-1-1955", and that there was no insurance in force from August 1, 1955, to November 1, 1955. On such premise plaintiff argues that the sum of $4.98, remitted November 1, 1955, was consideration for a new contract of insurance arising instanter by operation of law; that the sum of $4.98 effected three premium payments on the "new contract", to wit: installments due November 1, 1955, December 1, 1955, and January 1, 1956. Having so rationalized, plaintiff further argues that by reason of subsequent premium payments fully in compliance with the schedule therefor, the policy never again lapsed, and *128 that no reinstatement, although applied for and granted, was in fact needed.
The frailty of the proposition above advanced lies in the assumption that the policy became void immediately after August 1, 1955. The policy itself speaks otherwise in the following language: "In the payment of the second and subsequent premiums, a grace of thirty-one days will be allowed, without interest charge, and if the Insured die during the said thirty-one days, the unpaid premium will be deducted from the amount payable under this policy."
The foregoing is clear and unambiguous. It is not in conflict with the clause providing that the policy shall become void if any premium or installment shall not be paid when due. The last quoted clause simply affords a grace period of thirty-one days in which (1) premiums may be paid although delinquent after the scheduled due date, and (2) the policy shall be fully in effect as to insurer's liability for death benefits.
During the grace period, the parties are completely in statu quo as to (1) the right of insured to pay premium so as to avoid lapse, and (2) the duty of defendant to pay benefits if death occurs. No rights of either party are affected or diminished during the thirty-one days following the scheduled due date. Neither logic nor precedent permits us to regard an instrument as null and void while it remains undiminished in original effect and vitality.
Only at the end of the grace period do the rights of the parties expire. Not until then is insured precluded from the absolute privilege of paying the premium due, or is insurer unqualifiedly relieved of its liability for loss. The "day when due" in the first instance was August 1, 1955, but it became a new and succeeding day as the procession of 31 days came and went. The 31st day was the last "day when due". At the first instant of the 32d day, the policy expirednot before.
We rule that the policy did not lapse or become void immediately after August 1, 1955, but that it did lapse immediately after the grace period of 31 days. See, 45 C.J.S. Insurance § 625, p. 488; Simpkins v. Business Men's Assur. Co. of America, 31 Tenn. App. 306, 215 S.W.2d 1; Goldberg v. Mutual Life Ins. Co. of New York, 263 A.D. 10, 31 N.Y.S.2d 154; Aetna Life Ins. Co. v. Wimberly, 102 Tex. 46, 112 S.W. 1038, 23 L.R.A.,N.S., 759.
The policy remained in such condition of lapse (whether or not it was "void" we need not rule) until November 1, 1955, the date defendant accepted three premium installments totaling $4.98, thereby reinstating the policy. It is not shown in evidence that the reinstatement was made on written application. It is unnecessary to decide whether a "new contract" arose on November 1, 1955, as plaintiff insists. We do find that the reinstatement caused a resumption of contractual relations between insurer and insured on November 1, 1955, under the terms of the policy as first written.
The policy contract controls the disposition of the sum of $4.98 paid upon reinstatement by the following clause: "This policy may be reinstated on written application therefor within one year after non-payment of any premium, subject to evidence of insurability satisfactory to the Company, and upon payment of delinquent premiums, with interest at six per cent per annum to date of restoration".
It has been demonstrated that the policy was in full force during the grace period following August 1, 1955. The premium pledged as consideration for the coverage had not been paid and was delinquent under the contract. Defendant was entitled to satisfaction of the debt.
Plaintiff has cited and quoted from numerous cases belaboring the point that no premium is due for any interim while the *129 policy is not in force. We recognize and follow that rule.
We also observe and apply the converse principle that the insurer is entitled to a premium it has earned while its policy is in force. 44 C.J.S. Insurance § 355, p. 1330, states the following: "Where a valid contract of insurance has been effectuated, and the contract or policy has attached to the risk insured against, insured becomes liable for premiums earned during the life of the policy or contract of insurance".
Plaintiff has cited and relies upon the case, Watson v. Commonwealth Life & Accident Ins. Co., Mo.App., 17 S.W.2d 570, 571. That decision has vital bearing on the issues before us. The instrument involved there was a term policy of accident insurance with premiums payable in weekly installments. It provided a grace period of 4 weeks; also for reinstatement upon written application and "payment of all premiums in arrears".
Plaintiff concedes and urges in her brief that the policy in the Watson case, being a month to month contract, bears identity to the policy in suit.
The Watson case announces persuasive principles and prescribes a formula for premium allocation (upon reinstatement) which are applicable here. The following is excerpted from the opinion: "The policy in suit provides that after a lapse it may be revived upon payment of all premiums in arrears. It further provides that there shall be no liability whatever for accident occurring or illness contracted prior to or within two weeks following the date of revival. What is meant by the payment of all premiums in arrears? Certainly it cannot be said that the insured was in arrears for the entire period from March 12 to June 11, 1923, because, as is said in the case of Fallis v. Insurance Co., supra, `that would require the insured to pay something for nothing and would therefore be without consideration.' The insurance, however, did continue in force for a period of four weeks beginning with the premiums due March 12, (the grace period), and therefore the premiums were in arrears for that period, and the company was entitled to charge 50 cents per week, or $2, against the payment of $7.50 made by insured on June 11". (Emphasis supplied.)
As the insurer in the Watson case was entitled "to charge" for the 4 weeks coverage during grace, so is defendant here entitled to be paid the delinquent premium in dispute.
We so rule, and consider the sum of $1.66 as applied in satisfaction of the premium scheduled for payment August 1, 1955. The remaining sum of $3.32 is held to be payment of premiums on the reinstated policy due November 1, 1955 and December 1, 1955.
After November 1, 1955, premiums were paid as due, until default was made in payment of the installment scheduled September 1, 1956. The policy again lapsed on October 2, 1956, at the end of the grace period. Under plaintiff's evidence, the next premium payment was not made until October 31, 1956. The policy was reinstated on November 8, 1956.
Defendant offered in evidence its Exhibit No. 6, claiming it to be a written application for the reinstatement. The instrument purports to have been executed by insured on October 6, 1956. It contains the following representation: "I hereby state I am in good health, free from all diseases and ailments and that since this policy was issued I have had no injuries, ailments or illnesses and have not been sick nor consulted a physician for any reason, except: . . . none".
The exhibit was admitted in evidence over plaintiff's objection that it had not been identified.
We find no impropriety in the trial court's ruling. It was shown by defendant and admitted by plaintiff that the document was produced from defendant's business *130 records. Defendant's assistant secretarytestified that the application was received by mail at the home office, together with an enclosed and accompanying money order, dated October 31, 1956, in the amount of $6.64. Plaintiff admits the money order was mailed as premium payments, but is silent as to authorship of the application. Under such evidence the trial court did not abuse the discretion vested in it by Section 490.680, V.A.M.S.
We believe the instrument is an application made and transmitted by or on behalf of insured and that the reinstatement was granted in reliance upon its truth. The application was necessarily material because the policy had been in lapse since October 2, 1956.
The evidence clearly shows that the application contained misrepresentations respecting insured's condition of health, his consultation of doctors and his insurability. The application was dated October 31, 1956. On that identical day, insured was a patient in a United States Veterans Hospital. It can reasonably be inferred that he was then in consultation with doctors and receiving treatment from them. The inference extends to the entire period of his hospitalization from March 12, 1956, to June 3, 1957.
By undisputed evidence, insured was shown to be suffering a fatal malady when the application was made, and had been afflicted by it since June 20, 1955. The death certificate conclusively established the cause of insured's death as carcinoma of the rectum and metastasis, and that the duration of the disease had been two years.
Defendant completely satisfied its burden of proof imposed by Section 377.340, V.A.M.S. Repudiation of the reinstatement was fully justified.
Defendant's right to avoid the reinstatement would not be denied even if it be shown or held that the misrepresentations were made in ignorance of the true facts attending. See Woods v. National Aid Life Ass'n, Mo.App., 87 S.W.2d 698.
Section 377.320, V.A.M.S., entitled, "Policy incontestable after one year" does not bar defendant from contesting the validity of the policy as reinstated. The statute is inapplicable here, for the reason that the policy had not been in force for one full year after reinstatement. "A reinstated policy should be viewed as a new contract, and the period for contestability for fraud or breach of warranty in the application for reinstatement runs from the time of reinstatement." 45 C.J.S. Insurance § 748b, p. 765; also see Chambers v. Metropolitan Life Ins. Co., 235 Mo.App. 884, 138 S.W.2d 29; Martin v. Metropolitan Life Ins. Co. of New York, Mo.App., 113 S.W.2d 1025.
Defendant was not required to deposit in court all premiums received by it under the policy since the date of original issuance. Section 376.610, V.A.M.S., invoked by plaintiff, has no application to the policy in suit. Stipulated premium plan policies are not governed by Section 376.610, V.A.M.S., but exclusively by Sections 377.210 to 377.460, V.A.M.S.; Blanke v. American Life & Accident Ins. Co., Mo. App., 230 S.W.2d 134. Also see Martin v. Metropolitan Life Ins. Co. of New York, Mo.App., 174 S.W.2d 222.
The total sum of $16.60 was received by defendant as premiums on and after November 1, 1955, the date of reinstatement. This sum was promptly paid into court after plaintiff filed her suit. Prior tender had been refused by plaintiff's attorney. Defendant has fully discharged its duty in respect to refunding premiums due to plaintiff.
The transcript contains evidence of other premium payments, lapses, reinstatements and applications therefor. A review *131 of the additional evidence is unnecessary for determination of this appeal.
No merit appears in plaintiff's contentions above considered. The general findings of the trial court were in accordance with the evidence and applicable law, and were for the right party.
Plaintiff in one further assignment suggests that the opinion in Hatchett v. Cosmopolitan Life, Health & Accident Ins. Co., 241 Mo.App. 1098, 247 S.W.2d 348, does not constitute the law of this case. Our view of that case would not affect the result reached. Consequently we refrain from comment.
We conclude that the insurance policy here sued upon was void and of no force and effect at the date of insured's death. Plaintiff is entitled to judgment for only the limited sum of $16.60 tendered into court by defendant as premiums returned.
In accordance with our determinations, the judgment is affirmed.
All concur.
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50 B.R. 80 (1985)
In re Marley Andrew MENCER, Debtor.
Mary Elizabeth MENCER, Plaintiff,
v.
Marley Andrew MENCER, Defendant.
No. LR 84-865M, Adv. No. AP 84-493M.
United States Bankruptcy Court, E.D. Arkansas, W.D.
May 6, 1985.
*81 William Kirby Mouser, Baim, Gunti, Mouser, Bryant & DeSimone, Pine Bluff, Ark., for plaintiff.
Susan Gunter, Mitchell, Williams, Selig, Jackson & Tucker, Little Rock, Ark., for defendant.
ORDER
JAMES G. MIXON, Bankruptcy Judge.
Marley Mencer filed a petition for relief under the provisions of Chapter 7 on July 5, 1984. On November 2, 1984, Mary Elizabeth Mencer, debtor's former wife, filed a complaint objecting to the dischargeability of a $30,000.00 debt which arose out of a divorce decree which incorporated a "marital settlement agreement." The issue is whether the debtor's obligation to his ex-wife is excepted from discharge under 11 U.S.C. § 523(a)(5) which provides:
A discharge under section 727, 1141 or 1328(b) of this title does not discharge an individual debtor from any debt
(5) to a spouse, former spouse, or child of the debtor for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or property settlement agreement, but not to the extent that
(A) such debt is assigned to another entity, voluntarily, by operation of law, or *82 otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act or other such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); or
(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support;
Marley A. Mencer and Mary Elizabeth Mencer were married in 1966 and from this marriage three children were born. The parties were divorced in May of 1982 by the Chancery Court of Chicot County, Arkansas. The children at that time were ages 14, 12, and 10. Mary Elizabeth was awarded custody of the three children although the testimony indicated that one of the children now resides with Marley by mutual agreement. Mary Elizabeth testified that during the marriage she was a housewife. She further stated that she performed the duties of a housewife, mother and farm hand. She said she drove tractors and helped her husband with his occupation as a farmer. The parties, at the time of the divorce, did not own a homestead, but resided in a home owned by Marley's mother. During the negotiations leading up to the entry of the divorce decree, Marley discharged his attorney. The "marital settlement agreement" and divorce decree were both prepared by Mary Elizabeth's attorney, who is different counsel from her present counsel.
The decree provided under a general heading number one as follows:
That in settlement of the interest of Mary Elizabeth in the marital property she shall receive the following: . . .
D. The sum of $31,000.00, to be paid $6,000.00 on or before July 10, 1983, and the balance on or before expiration of 18 months from the entry of a decree divorcing the parties, (divorce decree), any amount of such obligation not paid when due to bear interest from date hereof at the rate of 10% per annum until paid and amounts due hereunder shall be further evidenced by the promissory note of Andy payable to Mary Elizabeth.
Under general heading number 7, the settlement provides:
It is agreed that Mary Elizabeth and the children shall be entitled to remain in the present residence of the parties until full performance by Andy of the obligations for payments to her as provided in paragraph 1D above in this Agreement. Upon final payment of these amounts Mary Elizabeth agrees that she will find suitable housing for herself and the children. During such time as she continues to remain in the present housing, Andy will assure to her by agreement of his mother, brothers and sister that she can live in the house rent free with water and sewerage service to the property maintained and available without cost to her. At such time as final payment has been made to her as provided then her right to continued use and occupancy shall terminate.
The testimony was that Mary Elizabeth, some time after the entry of the divorce decree, reached a compromise settlement with the debtor's mother. The settlement provided that the debtor's mother pay Mary Elizabeth $20,000.00 of the $30,000.00 debt and that Mary Elizabeth and the children move out of the house. Presumably the debtor's mother under general principles of subrogation holds a claim for $20,000.00 which is sought to be discharged by the debtor. Mary Elizabeth had little outside work experience prior to the divorce and now works at a bank in McGehee, Arkansas, as a teller. Marley moved to Little Rock, Arkansas, remarried and works as a paramedic. Both parties are acting in good faith and are credible witnesses. The facts present a difficult question of law.
CONCLUSIONS OF LAW
The question of whether payments under a divorce decree are in the nature of support, alimony or child support is a federal question to be determined by the Bankruptcy Court. In re Cartner, 9 B.R. *83 543, (Bkrtcy.M.D.Ala.1981); In re Williams, 703 F.2d 1055 (8th Cir.1983); H.R. Rep. No. 595, 95th Cong. 2nd Sess. 364, reprinted in 1978 U.S.Code Cong. & Admin. News 5787, 5963, 6320; S.Rep. No. 989, 95th Cong., 2nd Sess. 79, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5868.
The Bankruptcy Court is not bound by a state court's prior determination of an award as support or a property settlement. In re Williams, 703 F.2d at 1056; In re Lineberry, 9 B.R. 700 (Bkrtcy. W.D.Mo., C.D.1981); Matter of Hughes, 16 B.R. 90 (Bkrtcy.N.D.Ala., S.D.1981); Brown v. Felsen, 442 U.S. 127, 99 S. Ct. 2205, 60 L. Ed. 2d 767 (1979). The Bankruptcy Court may look behind a divorce decree to determine the real nature of liabilities regardless how the decree characterizes them. 3 Collier on Bankruptcy, ¶ 523.15(1) (15th Ed.1980); In re Nelson, 16 B.R. 658 (Bkrtcy.M.D.Tenn.1981); In re Vickers, 24 B.R. 112, 7 C.B.C. 849 (1982); In re Carrigg, 14 B.R. 658, 5 C.B.C. 446 (Bkrtcy.D.S.C.1981). The rationale for this rule is to promote the congressional intent to have questions of dischargeability determined by the Bankruptcy Court rather than state court in order to develop appropriate federal standards. In re Carrigg, 14 B.R. 658, 5 C.B.C. at 449; In re Netherton, 2 B.R. 50 (Bkrtcy.M.D.Tenn.1979). Section 523 was written to overrule prior decisions that deferred to state law any question of whether a debt is alimony, maintenance or support. 3 Collier on Bankruptcy, ¶ 523.15 (15th Ed.); Compare In re Waller, 494 F.2d 447 (6th Cir.1974) with Fife v. Fife, 1 Utah 2d 281, 265 P.2d 642 (1952). Often property settlements which are incorporated in divorce decrees are drafted and liabilities characterized for tax or other considerations not connected with bankruptcy. In re Warner, 5 B.R. 434 (Bkrtcy.D.Utah C.D. 1980); In re Carrigg, 14 B.R. 658, 5 C.B.C. at 450, In re Nelson, 16 B.R. 658 (Bkrtcy. M.D.Tenn.1981). While obligations for alimony, support and child support are not dischargeable in bankruptcy, obligations which are in the nature of a property settlement are dischargeable. In re Brown, 7 B.R. 268 (Bkrtcy.W.D.N.Y.1980); In re Nelson, 16 B.R. 658 (Bkrtcy.M.D.Tenn. 1981); In re Demkow, 8 B.R. 554 (Bkrtcy. N.D.Ohio, E.D.1981). The debtor's right to a fresh start must give way to Congress' expressed intent that the debtor's obligations and agreement to support his former spouse or children remain inviolate. Boyle v. Donovan, 724 F.2d 681 (8th Cir. 1984).
The Court views the debtor's obligations here to be a promise to provide his former spouse with a means to provide a home for herself and the children. This intent is clearly expressed in the settlement agreement and is corroborated by the testimony.
The debtor and his spouse were married for 16 years. By mutual agreement, Mary Elizabeth Mencer worked to help the debtor to farm, to raise their children and to perform the many other duties of a housewife. As a result, her ability to support herself and the parties' children after the divorce has been diminished. This was apparently recognized by the debtor who agreed to provide her a means to insure her of having a suitable home. Although there is authority to the contrary, the better reasoned cases which have considered this question have held obligations, whether payable directly to a former spouse or to a third party, that are payments for a home for the former spouse or children are in the nature of support and are nondischargeable. In re Maitlen, 658 F.2d 466 (7th Cir.1981); Matter of Hughes, 16 B.R. 90 (Bkrtcy.N.D.Ala., S.D.1981); In re Henry, 5 B.R. 342 (Bkrtcy.M.D.Fla.1980). Contra In re Brown, 7 B.R. 268 (Bkrtcy.W.D.N.Y. 1980); In re Nelson, 16 B.R. 658 (Bkrtcy. M.D.Tenn.1981); In re Demkow, 8 B.R. 554 (Bkrtcy.N.D.Ohio, E.D.1981); In re Ingram, 5 B.R. 232 (N.D.Ga., Rome D.1980).
The Court concludes that the obligation of Marley Mencer to pay to Mary Elizabeth Mencer the sum of $31,000.00 is in the nature of support and is determined to be nondischargeable pursuant to the provisions of 11 U.S.C. § 523(a)(5).
IT IS SO ORDERED.
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50 B.R. 790 (1985)
In re CATAMOUNT DYERS, INC., Debtor.
Bankruptcy No. 82-00160.
United States Bankruptcy Court, D. Vermont.
July 12, 1985.
*791 David D. Robinson, Rutland, Vt., trustee, pro se.
Merideth Wright, Asst. Atty. Gen., Montpelier, Vt., for State of Vermont, Agency of Environmental Conservation.
James J. Cormier, Jr., Rutland, Vt., for Bennington County Industrial Development Corp.
William C. Dagger, Rutland, Vt., for Vermont Industrial Development Authority.
John R. Canney, III, Rutland, Vt., for Dorothy Smith.
MEMORANDUM OPINION
CHARLES J. MARRO, Bankruptcy Judge.
This is another of the increasing number of cases which square off a trustee of the estate of the debtor seeking to abandon assets against a state environmental agency attempting to enforce an order for the removal of hazardous waste material from the site of premises on which the debtor conducted its business.
After liquidating most of the physical assets of the Debtor, the Trustee did on January 29, 1985 file a Notice of his Intent, pursuant to § 554(a) of the Bankruptcy Code, to Abandon all of the chemicals and containers set forth in a list attached to the notice. The State of Vermont objected to *792 the Trustee's intent to abandon this property on the grounds that the chemicals constituted hazardous waste under Vermont law, 10 V.S.A. chapter 159 and the regulations adopted thereunder, and must be disposed of pursuant to such law to avoid a hazard to the health and the environment. Likewise, Bennington County Industrial Development Corporation filed an Objection to the Trustee's Intent to Abandon this property on the grounds that such an abandonment was in direct contravention of an Order issued to the Trustee by the State of Vermont, Agency of Environmental Conservation with respect to this personal property on December 13, 1984, and, in addition, the abandonment would be prejudicial to the rights of Bennington County Industrial Development Corporation.
At a scheduled hearing on April 10, 1985 the parties in interest represented to the Court that it would not be necessary that testimony be taken for the reason that the parties contemplated the filing of a stipulation of facts to be followed by the filing of memoranda of law upon which the Court could make a determination of the issue involved in the Trustee's Intent to Abandon. A Stipulation was subsequently submitted to the Court, but it was not signed by all of the parties. Yet, they desired that the Court make a decision in the matter, and the Court is willing to accommodate based on the records in this case.
FACTS
Catamount Dyers, Inc., the Debtor, engaged in the business of dyeing and finishing textile products, filed a Petition for Relief under Chapter 11 of the Bankruptcy Code on July 8, 1982, and the proceeding was converted to a Chapter 7 liquidation on March 13, 1984 with David D. Robinson, Esquire, appointed as interim trustee, and he is still the duly qualified and acting trustee.
The property upon which the Debtor conducted its business was leased from Bennington County Industrial Corporation, the holder of the legal title of the property.
The Trustee sold almost all of the physical assets of the Debtor and the Court approved the sale by Order entered November 21, 1984. In an Affidavit executed by the Trustee and filed on April 10, 1985, the Trustee averred that the remaining assets consisting of various barrels and containers of miscellaneous chemicals, dyes and other materials were not offered for sale at auction due to the threats and demands of the State of Vermont Environmental Protection Agency by and through its agent; that no person or entity known to the Trustee was interested in purchasing, for any amount, these items; that some or all of the containers and or of the contents of the containers constitute hazardous waste and that the disposal of these items would require an expenditure of a great amount of time and effort with no consequential benefit to the estate.
On December 13, 1984 the Commissioner of the Department of Water Resources and Environmental Engineering Agency of Environmental Conservation for the State of Vermont in exercise of his authority under 10 V.S.A. § 6610a made certain Findings relative to the hazardous waste materials of the Debtor including one that legal title of the property leased by Catamount Dyers was held by Bennington County Industrial Development Corporation and that Vermont Industrial Development Authority held equitable title by virtue of a loan made to the Debtor by Merchants Bank and guaranteed by Vermont Industrial Development Authority. He then proceeded to issue the following Order:
"1. Within sixty (60) days of the receipt of this order, BCIC and VIDA shall prepare and submit a closure plan for cleaning and decontamination of the site to the Agency.
"2. Within thirty (30) days of Agency approval of the submitted closure plan, BCIC and VIDA shall initiate the procedures for clean-up and decontamination described in the approved closure plan.
"3. All wastes generated by the cleaning/decontamination activities shall be:
*793 "a. Transported by a certified hazardous waste transporter;
"b. Accompanied by a hazardous waste manifest, prepared in accordance with Regulation 6610; and
"c. Treated and/or disposed of at a certified hazardous waste facility."
On December 13, 1984 the same commissioner likewise acting under 10 V.S.A. § 6610a issued the following Order directed to David D. Robinson, Esquire, Trustee, viz:
"1. Within sixty (60) days of the date of this order, the Trustee shall remove all waste materials listed in Appendix A which are located in and around the former Catamount Dyers building. All waste materials which are removed shall be:
"a. Transported by a certified hazardous waste transporter;
"b. Accompanied by a hazardous waste manifest, prepared in accordance with Regulation 6610; and
"c. Treated and/or disposed of at a certified waste facility."
The Small Business Administration claimed a perfected security interest in most of the personal property of the Debtor which was taken into the possession of the Trustee. In an adversary proceeding the Trustee filed a Complaint against the Small Business Administration to determine the validity of its security interest and also to determine the security interest of Clark Equipment Credit Corporation in certain personal property. In a Memorandum Opinion entered by the Court on April 23, 1985, the Court determined that Small Business Administration and Clark Equipment Credit Corporation held valid security interests in all of the personal property acquired by the Trustee. Judgment was entered declaring these security interests valid and, as a result, all of the funds now held by the Trustee other than administrative fees and expenses are subject to these security interests and there will be no money held by the Trustee which shall inure to the benefit of the unsecured creditors.
Small Business Administration has informed the Court that it takes the position that by virtue of its perfected security interest it is claiming all of the cash proceeds from the sale of the assets and that it takes no position as to the Trustee's Motion to Abandon the chemicals and contents set forth in a list attached to the notice of the trustee to abandon.
As conceded by the Small Business Administration, before distribution of the proceeds received by the Trustee is made, administration fees and expenses may be deducted.
The property which the Trustee is seeking to abandon has no realizable value to the estate of the Debtor. Bennington County Industrial Development Corporation permitted the Trustee to store the personal property of the estate on its premises until the liquidation of the Debtor's estate was completed.
DISCUSSION
Under 11 U.S.C. § 554(a) the trustee, after notice and hearing, may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. The trustee, in this case, has clearly brought himself within the purview of this statute since it has been established that the property has no realizable value or benefit to the estate. Nevertheless, both the State Agency and Bennington County Industrial Corporation contend that the Trustee may not abandon property in contravention of state environmental laws. Specifically, they refer to 10 V.S.A. Chapter 159 under which the state may through the secretary of the agency of environmental conservation or his duly authorized representative issue appropriate orders for the removal of hazardous waste. See § 6610a. It was pursuant to this statute that the aforesaid orders of December 13, 1984 were issued to BCIC and VIDA as well as to the Trustee.
In resisting abandonment both the State and BCIC maintain that the Trustee must comply with the State's order for removal of the hazardous waste. They *794 rely heavily on In the Matter of Quanta Resources Corp. (3d Cir. CCA 1984) 739 F.2d 912 which is directly in point. In Quanta Resources the Court, in a split decision, held that the Bankruptcy Reform Act did not permit abandonment of property by a bankruptcy estate, a waste oil processing and storage facility, in contravention of state and local environmental protection laws. The majority reasoned that § 554 itself refers only to the trustee's affirmative power to abandon and that it does not of itself preempt state police power regulations. Even so, the Court said that Congress did not intend the bankruptcy scheme generally to abrogate the enforcement of state police power regulations as evidenced by:
First, the express exception to the automatic stay otherwise imposed on all actions against the debtor, 11 U.S.C. § 362(a), for "the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power." Id. § 362(b)(4).
Second, the indication that the bankruptcy scheme is not intended to abrogate state laws is found in 28 U.S.C. § 959(b) (1982):
"(b) Except as provided in section 1166, a trustee, receiver or manager appointed in any cause pending in any court of the United States, including a debtor in possession, shall manage and operate the property in his possession as such trustee, receiver or manager according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof."
The majority in Quanta rejects the trustee's argument that section 959(b) is inapplicable outside a Chapter 11 proceeding where the trustee is managing the debtor's business. It said at page 919:
"Even in a Chapter 7 proceeding, however, the trustee may be authorized to operate a business. Id. § 721. Thus there is no reason to suppose Section 959(b) inapplicable in Chapter 7."
This Court does not agree with the reasoning of the majority in Quanta. It fails to see how there is any relationship between § 554 of the Code and the exception spelled out under § 362(b)(4) which permits a governmental unit to ignore the automatic stay and enforce its police and regulatory power.
There is no Legislative History spelled out under § 554 and its language is clear and unequivocal. It permits a trustee to abandon burdensome property to the estate or property which has an inconsequential value to the estate. In the instant case, there is no dispute that the hazardous waste materials have no realizable value to the estate of the Debtor. Environmental and hazardous waste problems were in existence long before the Bankruptcy Reform Act of 1978 known as the Bankruptcy Code was enacted and Congress was necessarily aware of them. Such being the case, it could have very well carved an exception to § 554 prohibiting abandonment of property constituting hazardous waste unless the trustee bore the expense of removing it.
Likewise, § 959(b) is not apposite. It applies specifically to a trustee who is managing and operating the property in his possession as trustee. The words "manage" and "operate" in the statute indicate affirmative action. To manage means "to direct or carry on business or affairs" and to operate means "to perform a function; to produce an appropriate effect." See Websters New Collegiate Dictionary.
Even though a trustee may be authorized to conduct a business as indicated by the majority in the instant case, the trustee's only function was to liquidate the assets, and for that reason § 959(b) has no application to him.
This Court prefers to follow the minority in the Quanta case and is impressed with the rationale of dissenting Circuit Judge Gibbons. See 739 F.2d 924-927. As late as May 9, 1985, a Bankruptcy Court rejected the majority and followed the dissent in the Quanta case. See In Re Union Scrap *795 Iron & Metal Company (Bankr.D.Minn. 1985) 49 B.R. 477, 13 B.C.D. 29. The reasoning of Bankruptcy Judge Kressel is aptly expressed as follows:
"The MPCA relies upon the case of City of New York v. Quanta Resources Corp. (In re Quanta Resources Corp.) 739 F.2d 912 [12 BCD 175] (3rd Cir.1984) for its position. There is little doubt that Quanta Resources supports the MPCA's position. The problem is that the majority opinion in Quanta Resources was attempting to graft its view or proper public policy onto the Bankruptcy Code. It may well be that the majority's opinion is good public policy. Unfortunately it is not the policy adopted by Congress in enacting § 554. Rather, I agree with the dissent in Quanta Resources that
`there is no legislative history suggesting that we may alter or amend [Section 554(a)]. The intent is clear. The record here establishes that the property is burdensome and of inconsequential value to the estate. . . . Thus, under federal law, the trustee may abandon the property.'
City of New York v. Quanta Resources Corp. (In re Quanta Resources Corp.), 739 F.2d 912, 923 (3rd Cir.1984), Rev. granted, [___ U.S. ___, 105 S. Ct. 1168, 84 L. Ed. 2d 319] (1985). Thus I feel compelled to follow the statute enacted by Congress rather than the Third Circuit's opinion in Quanta Resources."
The United States Supreme Court has agreed to review the Quanta case. In this respect, it is noted that it has already held that a clean-up order for hazardous waste is actually converted into an obligation to pay money which is dischargeable in bankruptcy. Ohio v. Kovacs, (1985) ___ U.S. ___, 105 S. Ct. 705, 83 L. Ed. 2d 649. What is significant in Kovacs is that the Supreme Court indicated in its dicta, footnote 12, that after notice and hearing the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value to the estate and went on to say:
". . . If the property was worth more than the costs of bringing it into compliance with state law, the trustee would undoubtedly sell it for its net value, and the buyer would clean up the property, in which event whatever obligation Kovacs might have had to clean up the property would have been satisfied. If the property were worth less than the cost of cleanup, the trustee would likely abandon it to its prior owner, who would have to comply with the state environmental law to the extent of his or its ability."
Although not determinative, the foregoing language may be indicative of the decision which may be made by the Supreme Court in reviewing Quanta.
In any event, this Court considers that the Trustee should be permitted to abandon. In reaching this result, the Court also observes that it is safe to assume that the hazardous waste condition has existed for sometime and it was not until after the Trustee had sold most of the assets that the State Agency issued its order requiring removal by the Trustee. It also notes that a similar order was directed to Bennington County Industrial Corporation and Vermont Industrial Development Authority on the same date; that the Trustee does not have and will not have, in view of the perfected security interest of Small Business Administration, any funds with which to pay the costs of removal and that the State is still in a position to require Bennington County Industrial Corporation and Vermont Industrial Development Authority to comply with the order.
The State also contends that it is entitled to priority for the cost of removal of the hazardous waste as an administrative expense. As of now, it has not filed a claim and has not established the amount thereof and whether it is an administrative claim in the Chapter 11 proceeding or in the Chapter 7 liquidation. Until this is done the Court is in no position to make a determination as to whether the State should be allowed the expense of cleanup as an administrative expense.
*796 The Clerk is instructed to enter Judgment in accordance with this Memorandum Opinion.
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886 S.W.2d 225 (1994)
Stephen HAAS and Laura Haas, Respondents/Cross-Appellants,
v.
TOWN AND COUNTRY MORTGAGE COMPANY, Appellant/Cross-Respondent.
Nos. 64880, 65231.
Missouri Court of Appeals, Eastern District, Division Three.
November 8, 1994.
*226 David S. Schmidt, Robert E. Morley & Associates, P.C., O'Fallon, for respondents/cross-appellants.
Julius Berg, Dennis Buchheit, Edward J. Hanlon, St. Louis, for appellant/cross-respondent.
CRANDALL, Judge.
Defendant, Town and Country Mortgage Company, appeals from the judgment of the trial court in favor of plaintiffs, Stephen and Laura Haas, entered pursuant to a jury verdict. The total judgment of $10,000.00 consisted of $5,000.00 for conversion and $5,000.00 for tortious interference with a business expectancy. Plaintiffs cross-appeal from the trial court's refusal to submit the issue of punitive damages to the jury. The judgment of the trial court in favor of plaintiffs on their actions for conversion and for tortious interference with a business expectancy is reversed. Plaintiffs' cross-appeal is denied.
Town and Country Mortgage Company (Town and Country) claims that plaintiffs failed to make a submissible case either for conversion or for tortious interference with a business expectancy. In deciding the issue of submissibility, we examine the evidence in the light most favorable to the verdicts, giving plaintiffs the benefit of all reasonable inferences. Biermann v. Gus Shaffar Ford, Inc., 805 S.W.2d 314, 317 (Mo.App.1991).
Plaintiffs were in the business of renting property, which they frequently acquired at foreclosure sales. In April 1991, they learned of a foreclosure proceeding against property identified as 3 Wendy Lane in St. Charles County (property). A search of the records in the office of the Recorder of Deeds revealed the name of the property owner, the amount of the original loan, and the identity of the mortgagee as defendant, Town and Country. The amount of the original loan was approximately $61,000.00 and plaintiffs estimated that the property was worth about $65,000.00. The documents pertaining to the mortgage indicated that the loan was assumable.
Plaintiffs spoke with the record owner of the property and learned that the amount in *227 arrears on the mortgage, plus the attorney's fees associated with the pending foreclosure, equalled about $5,000.00. The owner agreed to turn over the property to plaintiffs in return for them paying $5,000.00 to Town and Country and assuming the balance of the loan.
Because the present owner had assumed the loan from the previous owner of the property, plaintiffs thought there were no specific qualifications to assume the loan. The deed of trust on the property indicated that the loan was a Missouri Housing Development Commission (MHDC) loan. In order to assume the loan, MHDC required the purchaser to be a first time buyer, to live in the property, and to qualify financially. It is undisputed that plaintiffs failed to satisfy any of the MHDC requirements.
Plaintiffs arranged for the same title company that handled other real estate closings for them to handle closing on the property. The title company obtained information, by way of facsimile, on the delinquent loan from Town and Country. The facsimile contained the notation, "Purchasers must meet investor requirements. Please contact [Town and Country] for further information." Plaintiffs never contacted Town and Country. Prior to closing, Town and Country also sent an assumption package to the title company. The assumption package contained information that the loan was a MHDC loan.
At the closing on April 12, 1991, plaintiffs did not read any of the documents, but relied on the title company to explain each document to them. Plaintiffs signed all of the documents presented to them. They gave $5,800.00 to the title company and the title company paid about $5,725.00 to Town and Country.
On April 19, 1991, Town and Country notified plaintiffs that after receiving the closing package back from the title company, it realized they did not meet the qualifications for the MHDC loan and were not eligible to assume the loan. In addition, MHDC regulations prohibited them from renting the property. Town and Country offered them three options: pay off the loan; sell the house; or deed the house to Town and Country.
Although the title company told plaintiffs to make the payments to Town and Country until the situation could be resolved, plaintiffs did not make the first payment due on June 1. In June 1991 and again in July 1991, Town and Country reported to credit bureaus that plaintiffs were delinquent in their mortgage payments in the amount of $4,969.00 and that foreclosure was pending. Plaintiffs subsequently were denied credit by five credit card companies and were required to pay 18 percent interest on a loan for an automobile.
On June 21, 1991, plaintiffs brought the present action against Town and Country. On July 11, 1991, plaintiffs deeded the property to Town and Country and received the sum of $4,791.73, the amount equal to the sum of money they paid to Town and Country minus the foreclosure expenses incurred by Town and Country.
The jury found in favor of plaintiffs. It awarded $5,000.00 on plaintiffs' conversion claim, because Town and Country initially refused to return the money. It also awarded $5,000.00 on plaintiffs' tortious interference with business relations claim, because Town and Country caused certain credit card companies to deny them credit.
In its first point, Town and Country claims the trial court erred in failing to grant its motion for judgment notwithstanding the verdict on plaintiffs' claim for conversion.
Conversion is the "unauthorized assumption of the rights of ownership over the personal property of another to the exclusion of the owner's rights." Rehbein v. St. Louis Southwestern Ry. Co., 740 S.W.2d 181, 182-183 (Mo.App.1987) (quoting Maples v. United Sav. and Loan Ass'n, 686 S.W.2d 525, 527 (Mo.App.1985). A general debt will not give rise to a cause of action in conversion. Hall v. W.L. Brady Investments, Inc., 684 S.W.2d 379, 384 (Mo.App.1984). Generally, an action for conversion lies only for a specific chattel which has been wrongfully converted, thus a claim for money may not be asserted in conversion. Biermann v. Gus Shaffar Ford, Inc., 805 S.W.2d 314, 318 (Mo.App.1991). Conversion may lie, however, where funds *228 given into the custody of another for a specific purpose are diverted by the holder for other than such specified purpose. Hall, 684 S.W.2d at 384.
This case does not fall within the exception that allows conversion to lie for money. Plaintiffs handed over the money, not to Town and Country, but to the title company. The title company kept some of the funds to cover the costs of closing and then forwarded the remainder of the money to Town and Country. Thus, the money was not given into the custody of Town and Country for a specific purpose from which it was diverted.
Moreover, there is no evidence that Town and Country wrongfully assumed and exercised control over the money. At closing, plaintiffs signed documents indicating that they fulfilled the conditions for assuming the loan, when in fact they did not. In return for the money, plaintiffs received title to the property. When plaintiffs discovered that they were unable to assume the loan, they made demand upon Town and Country to return the money. In essence, plaintiffs sought rescission of the agreement with Town and Country. Rescission of a contract involves restoration of the status quo of the parties, unless the parties have agreed otherwise. Dilts v. Lynch, 655 S.W.2d 118, 121 (Mo.App.1983). There was no duty on Town and Country to refund the money unless plaintiffs also tendered title to the property. In July 1991, plaintiffs received from Town and Country $4,791.73, in return for their conveying the property to Town and Country. Town and Country, therefore, did not wrongfully retain possession of the money until such time that it received title to the property.
Town and Country did refuse to return that portion of the money which related to the foreclosure costs. Town and Country's withholding of that money, however, was not wrongful and did not constitute conversion. Town and Country incurred expenses associated with the foreclosure and such expenses are recoverable at foreclosure. As a result of plaintiffs' assurances that they were eligible to assume the loan, Town and Country ceased the foreclosure proceedings. Plaintiffs' actions thus prevented Town and Country from recovering their expenses. Plaintiffs were not entitled to a return of the money Town and Country applied to the foreclosure costs.
Plaintiffs did not make a submissible case in conversion of the money given to Town and Country. The trial court erred when it refused to grant judgment notwithstanding the verdict in favor of Town and Country. Town and Country's first point is granted.
Town and Country next contends the trial court erred in failing to grant its motion for judgment notwithstanding the verdict on plaintiffs' claim for tortious interference with a business expectancy. This claim was based upon Town and Country's reporting to credit agencies that plaintiffs were delinquent in payments on the loan for the property. Plaintiffs contended that as a result of Town and Country's actions, they were denied credit by certain specified credit card companies and were required to pay 18 percent interest on an automobile loan.
A claim for tortious interference with a contract or business expectancy requires proof of each of the following: (1) a contract or a valid business expectancy; (2) defendant's knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of contract or relationship; (4) absence of justification; and (5) damages resulting from defendant's conduct. Luketich v. Goedecke, Wood & Co., Inc., 835 S.W.2d 504, 508 (Mo.App. E.D.1992).
Here, the only evidence to support plaintiffs' tortious interference claim was the testimony of plaintiff, Stephen Haas. He testified that sometime after Town and Country reported the delinquent payments to the credit reporting services, plaintiffs were denied credit and were charged a high interest rate on a car loan. There is no evidence in the record that at the time Town and Country issued the credit reports that plaintiffs had established a business relationship either with any of the credit card companies which denied them coverage or with the lender of the car loan. Plaintiffs' mere hope of establishing a business relationship with the companies was tenuous and did not evince the *229 existence of a valid business relationship or expectancy. Plaintiffs failed to prove one of the elements of tortious interference with a business expectancy, and thus failed to make a submissible case on that claim. Town and Country's second point is granted.
In plaintiffs' cross-appeal, they allege the trial court erred in refusing to submit the issue of punitive damages to the jury either on their conversion claim or on their tortious interference claim. Because plaintiffs were not entitled to recover actual damages on their claims, their claim for punitive damages must also fail. In the absence of evidence of actual damages, there can be no punitive damages. McCall v. Jim Lynch Cadillac, Inc., 791 S.W.2d 456, 459 (Mo.App.1990). Plaintiffs' point on appeal is denied.
The judgment of the trial court in favor of plaintiffs on their actions for conversion and for tortious interference with a business expectancy is reversed. Plaintiffs' cross-appeal is denied.
CRANE, P.J., and DOWD, J., concur.
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107 N.H. 165 (1966)
BLANCHE O. FARNUM
v.
BRISTOL-MYERS COMPANY.
No. 5425.
Supreme Court of New Hampshire.
Argued January 4, 1966.
Decided April 29, 1966.
*166 Eugene S. Daniell, Jr. (by brief and orally), for the plaintiff.
Hall, Zellers, Morse & Gallagher (Mr. Mayland H. Morse, Jr. orally), for the defendant.
DUNCAN, J.
This transfer in advance of trial consolidates two reserved cases arising out of an action to recover damages for skin rashes or dermatitis suffered by the plaintiff, allegedly as a result of the use of a deodorant known as Ban, manufactured and marketed by the defendant, which she purchased in Tilton on April 17, 1957. One count of the writ alleges breach of warranty, and the other negligence in manufacture.
The plaintiff filed twenty-one interrogatories under Superior Court Rule 29. Certain of these were voluntarily answered by the defendant. As to the remainder, the Superior Court (Loughlin, J.) on May 7, 1964, and subject to exceptions by both parties, ruled that some should be answered and that others need not be. Superior Court Rule 37. Thereafter the defendant complied with the rulings of the Court by answers under date of June 3, 1964.
On November 27, 1964, the plaintiff filed a motion for disclosure of certain information by the defendant. The motion was heard by the Court (Leahy, C. J.) in conjunction with the pre-trial hearing, and on January 12, 1965 was granted in part and denied in part, subject to the defendant's exception. The issues raised by this exception were reserved and transferred by the Presiding Justice on April 7, 1965; and the issues presented by the exceptions of both parties to the orders of May 7, 1964 were reserved and transferred by Loughlin, J. on May 18, 1965.
Two major issues are presented by the briefs and arguments before us. The first relates to the scope of the order of January 12, 1965 with respect to disclosure of complaints received by the defendant from persons "adversely affected by the use of defendant's product." The second relates to refusal of the Court by the order of May 7, 1964 to require the defendant to furnish a "complete chemical analysis" of its product "as manufactured in January of 1957," and to disclose its knowledge concerning the capability of the ingredients to cause harm to users.
*167 The order of January 12, 1965 required the defendant to furnish the names and addresses of the "originators" of complaints of having been "adversely affected by the use of defendant's product `Ban'" (alleged by the plaintiff to have been over five hundred in number), the dates of such complaints, and the "nature of [each] complaint, whether or not said complaint was in writing and if so the nature of the writing."
The defendant maintains that this order was unduly broad, should be limited by reference to the dates of purchase, of use and of complaint, and further restricted to complaints which were similar in nature to those of the plaintiff herein.
In answer to the plaintiff's interrogatories, the defendant has disclosed that Ban has been manufactured by it since 1954, and distributed in New Hampshire since 1955. It has further disclosed that the chemical formula has been altered or changed five times since January 1957, on the following dates: November 3, 1958; January 16, 1959; January 29, 1959; August 29, 1960, and January 8, 1962. Its answers also disclose that prior to May of 1957 warning was given "no more and no less than that any product may cause skin irritation to some users," apparently by representation that it was "safe for normal skin"; and that on or after August 28, 1960, warning was given on the package or container: "do not apply antiperspirant on broken skin or if rash develops."
Questions which sought to discover the number of complaints of skin irritation received by the defendant in the calendar years 1956-1958 inclusive were not required to be answered by the order of May 7, 1964. The defendant points to this circumstance as further indication of the "unlimited sweep" of the later order of January 12, 1965.
The right of a party to be free from the burden of discovering records "which could have no possible `legitimate bearing'" on the issues of the case (Staargaard v. Company, 96 N. H. 17, 19), and from unjustified harassment or impertinent intrusion (Currier v. Company, 101 N. H. 205, 206) is well established. McDuffey v. Boston & Maine R. R., 102 N. H. 179. On the other hand, we think that the scope of permissible discovery in this case should not be confined to complaints made before the date of the plaintiff's purchase, as suggested by the defendant. Evidence that complaints were made after April 1957 may well *168 be material and competent upon the question of whether harm was probably caused by an ingredient of the product, rather than as the result of abnormal susceptibility on the part of the complainant. See 2 Harper & James, Torts, s. 28.8. It may also be material upon the issue of notice to the defendant of a risk inherent in use of its product by persons of normal susceptibility, and upon the issue of a duty to warn. Harper & James, supra, s. 28.7. Bleacher v. Bristol-Myers Co., (Del. Super. Ct.) 163 A.2d 526; Wright v. Carter Products, 244 F.2d 53, 58 (2d Cir. 1957) and cases cited.
We are of the opinion that upon this record, the order of discovery should be limited to disclosure of complaints of the same nature as that made by the plaintiff, which were received by the defendant during the period ending August 29, 1960, when it warned of the risk of use "on broken skin, or if rash develops" and changed the formula for the fourth time. The defendant's exception is sustained to the extent that the order should be thus modified.
The defendant has complied with the order of May 7, 1964 requiring it to disclose the ingredients of its product. As a part of the order the Trial Court ruled that a "complete chemical analysis of the contents of this product as manufactured in January of 1957, including the percentage by volume or weight of each ingredient to the whole" need not be given. The Court further ruled that the defendant need not answer certain questions regarding the characteristics of ingredients, the possibilities of irritation, and the comparative merits of the products of its "new" and old formulae. To these rulings the plaintiff excepted.
The defendant maintains that its duty to disclose information concerning the ingredients of its product should not be enlarged beyond the scope of the order already complied with, while the plaintiff asserts that it was error to thus restrict the field of inquiry by written interrogatories. Rule 37 of the Superior Court rules contemplates full disclosure by a party on deposition or interrogatory except where the information sought is subject to privilege or answer is excused by statute.
However the extent to which rigid compliance with Rule 37 will be required in a particular case is a matter within the discretion of the Trial Court.
*169 The order entered in this case recognized the defendant's interest in preserving the secrecy of its formula, by ordering that the ingredients utilized in 1957 be disclosed, but not their relative proportions. While it is settled law that trade secrets and the like enjoy no absolute privilege (Lincoln v. Langley, 99 N. H. 158; Spain v. Company, 94 N. H. 400; Annot. 17 A.L.R. 2d 383) their disclosure ordinarily will not be required in advance of trial, except in case of urgent necessity, and then subject to protective orders by the court when justice so requires. Ingram v. Railroad, 89 N. H. 277, 279-280. See Rule 30(b), Federal Rules of Civil Procedure; 4 Moore's Federal Practice (2d ed.) s. 30.12; Baker v. Proctor & Gamble Co., (D.S.D. N. Y. 1952) 17 F. R. Serv. 460, 30b.352, Case 1. See also, Glick v. McKesson & Robbins (D.W.D. Mo. 1950) 10 F.R.D. 477.
The contentions of the parties presented an issue of fact for the determination of the Trial Court. The defendant asserts that its product is readily available for analysis by the plaintiff, while the plaintiff points out that the product presently marketed is manufactured by a formula differing from that used when she made her purchase.
Whether the general nature of the several changes in the formula can be indicated, without disclosure of the formulae themselves, in a way which would answer the plaintiff's requirements cannot be determined upon the record before us. If it appears from competent evidence that disclosure of the formula in advance of trial is "essential" or "urgently necessary" (Wagner Mfg. Co. v. Cutler-Hammer, (D. S.D. Ohio 1950) 10 F.R.D. 480, 485; Hyman v. Revlon Products Corp., 277 App. Div. N. Y. 1118), the Trial Court has the authority to order it subject to suitable conditions calculated to prevent public disclosure or improper use of the information. Chemical & Industrial Corp. v. Druffel, 301 F.2d 126 (6th Cir. 1962); Melori Shoe Corp. v. Pierce & Stevens, Inc., (D. Mass. 1953) 14 F.R.D. 346. See 2 Frumer & Friedman, Products Liability, s. 47.02; Developments-Discovery, 74 Harv. L. Rev. 940 1015-1018. The present state of the record warrants the orders made.
In declining to compel answers to the interrogatories which called for opinions or conclusions rather than disclosure of facts, the Trial Court committed no error. 4 Moore's Fed. Practice, *170 supra, s. 33.17; 9 Massachusetts Practice, Mottla, Civil Practice, s. 609.
The exceptions to the order of May 7, 1964 are overruled.
Plaintiff's exceptions overruled; defendant's exceptions sustained in part; remanded.
All concurred.
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242 Md. 459 (1966)
219 A.2d 254
ROBERTS
v.
WARDEN OF THE MARYLAND PENITENTIARY
[App. No. 78, September Term, 1965.]
Court of Appeals of Maryland.
Decided May 5, 1966.
Certiorari denied October 10, 1966.
Before PRESCOTT, C.J., and HAMMOND, HORNEY, MARBURY, OPPENHEIMER, BARNES and McWILLIAMS, JJ.
Certiorari denied, Supreme Court of the United States, October 10, 1966.
MARBURY, J., delivered the opinion of the Court.
We adopt the reasons set forth in the opinion of Judge Jones in the court below denying post conviction relief. However, the *460 answers to two contentions raised by the petitioner require additional amplification.
The first point needing additional discussion is petitioner's contention that the twenty year consecutive sentences imposed by Judge Carter in the Criminal Court of Baltimore under the second counts of indictments Nos. 506 and 507 (the simple assault counts) are illegal, in that the sentences under these counts could not exceed the statutory maximum of fifteen years for the statutory crime of assault with intent to murder. As pointed out by Judge Jones, this same contention was specifically rejected by this Court in Roberts v. Warden, 221 Md. 576, 580, 155 A.2d 891, because petitioner had failed to appeal the trial court's adverse determination of this matter and thereby the sentence had been finally litigated so as to preclude post conviction relief. In that case we stated that "failure to appeal is a right which the petitioner could, and did, waive. Jackson v. Warden, 218 Md. 652, 146 A.2d 438." But assuming that subsequent decisions by this and federal courts have limited the thrust of waiver, petitioner's contention is without substantive merit because as stated by Judge Horney, speaking for the Court in Gleaton v. State, 235 Md. 271, 277, 201 A.2d 353:
"There is * * * in this State no statutory limitation on the penalty which may be imposed for simple assault, and there was none at common law. Heath v. State, 198 Md. 455, 467, 85 A.2d 43 (1951); Apple v. State, 190 Md. 661, 668, 59 A.2d 509 (1948). Nor do we construe the penal limits imposable for the statutory assaults as implying a legislative policy to confine sentences for common law assault to not more than those prescribed for the statutory assaults. Statutes in derogation of the common law are strictly construed, and it is not to be presumed that the legislature by creating statutory assaults intended to make any alteration in the common law other than what has been specified and plainly pronounced. Dwarris on Statutes, 695. The matter of imposing sentences is left to the sound discretion of the trial court, and the only restraint on its power to fix a penalty is the constitutional *461 prohibitions against cruel and unusual penalties and punishment found in Articles 16 and 25 of the Maryland Declaration of Rights." (Citing cases.)
There was no such cruel and unusual punishment here. See opinion by Judge Chesnut in Roberts v. Pepersack, 190 F. Supp. 578, 582-83 (D.C. Md., 1960), affirmed 286 F.2d 635 (C.A. 4th, 1960).
A second point, which was not specifically dealt with in the lower court's opinion, is the petitioner's contention that the Criminal Court of Baltimore was limited to imposing no greater sentence for the simple assault than the maximum one year term then imposable by the City's Magistrate's Court for that offense. Unfortunately for the petitioner, this contention is without substantive merit for the same reasons as those set forth in Lloyd v. State, 219 Md. 343, 352-53, 149 A.2d 369, where a similar argument was raised and specifically rejected by this Court.
Application denied.
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336 S.W.2d 561 (1960)
Ross G. KREAMER et al., Appellants,
v.
H. C. HARMON et al., Appellees.
Court of Appeals of Kentucky.
June 17, 1960.
*562 James G. Begley, Danville, for appellants.
Pierce Lively, Danville, for appellees.
PALMORE, Judge.
This case involves the ownership of a system of water mains in a subdivision, and the contest is between the developers of the subdivision and the owners of the various lots. On the strength of Lee v. City of Park Hills, 1943, 295 Ky. 383, 174 S.W.2d 539, the trial court decided the question in favor of the developers. It is our opinion that the decision was correct.
The subdivision, called Owens Court, was established by the recording of a plat and sale of lots, beginning in 1951. It was situated on the Harrodsburg Road between the City of Danville and Caldwell Manor Subdivision. The water system was laid by the developers in the dedicated streets within Owens Court Subdivision and was connected with the water system of the City of Danville. Profits from the sale of the lots were sufficient to cover the cost of the water system. The water system in neighboring Caldwell Manor was owned by the Caldwell Manor Improvement Association, which purchased its water from the City of Danville and then collected from the individual consumers in that subdivision at a higher rate, devoting the profits to other improvements. In 1952 the developers of Owens Court Subdivision relieved themselves of performing a similar function by turning over to the Caldwell Improvement Association the right to collect water bills from the residents of Owens Court Subdivision. In 1957 the City of Danville determined to annex both subdivisions and agreed to buy the water systems, dividing *563 the purchase price on a percentage basis between the Caldwell Manor Improvement Association and the developers of Owens Court Subdivision. At this point the owners of various lots in Owens Court Subdivision laid claim to the share representing the system within their subdivision.
The facts are not materially different from those stated in Lee v. City of Park Hills, supra, in which it was held that the water mains were appurtenant to the lots conveyed and that the deeds gave the grantees the free use of the system. In so deciding, however, this court said specifically that title to the mains remained in the dedicators, even though the deeds expressly placed the burden of their upkeep and repair on the lot owners. In the instant case the lots were described by number and reference to the recorded plat, and the deeds made no mention of the water system. Nevertheless, in the absence of any provision to the contrary the existence of the mains at the time of the lot sales made their use an appurtenant right passing with each lot, and no question is raised as to the freedom of the lot owners from any surcharge for rent. That freedom continues, of course, unaffected by the transfer of ownership.
The result reached in Lee v. City of Park Hills was sound, but the premise on which it was said that the ownership of the water system remained in the dedicators requires clarification. The parties to this appeal treat the ownership of the water mains as incidental to the ownership of the fee in the streets. Appellees say that the streets remain the property of the dedicators, subject only to the easement of right-of-way. Appellants say that this is true, but the title is held by the dedicators in trust for the public, citing Brewer v. City of Mayfield, 1929, 231 Ky. 356, 21 S.W.2d 436, and Hedge v. Cavender, 1927, 217 Ky. 524, 290 S.W. 342. Neither of these theories is correct. The latter two cases are simply illustrations of the proposition that where a dedication has been made neither the dedicator nor any person holding title through him can close up or occupy an unopened portion of the dedicated property in derogation of the right of the public to have it opened later. Such an occupancy is considered in trust insofar as the unexercised public easement is concerned.
The rule is that if a conveyance is by lot, block or tract number with reference to a plat showing the property as abutting on a street or highway, the grantee takes to the center of the street or highway. See 8 Am.Jur. 775, 776 (Boundaries, §§ 38, 39); Blalock v. Atwood, 1913, 154 Ky. 394, 157 S.W. 694, 46 L.R.A.,N.S., 3; Hensley v. Lewis, 1939, 278 Ky. 510, 128 S.W.2d 917, 123 A.L.R. 537; Henkenberns v. Hauck, 1951, 314 Ky. 631, 236 S.W.2d 703; and annotations at 49 A.L.R. 2d 1006, 123 A.L.R. 547, and earlier volumes therein cited.
It is true, as said in Fayette County v. Morton, 1940, 282 Ky. 481, 138 S.W.2d 953, that in a common-law dedication the fee does not pass to the public. Only an easement passes, subject to which the fee, of course, remains where it was before, in the dedicator, or proprietor. 16 Am.Jur. 402, 403 (Dedication, § 56). But as each lot is sold so also is the proprietorship transferred, subject to the easement theretofore dedicated. This does not mean, however, that water mains or other similar facilities existing as integral parts of a utility system pass with the property. Such facilities remain in the proprietor, and a "quasi-easement" or servitude upon the land they occupy is created by implied reservation. This result follows logically from the basic rule that where the owner of an entire tract of land or of two or more adjoining parcels employs one part so that another derives from it a benefit of continuous, permanent and apparent nature, and reasonably necessary to the enjoyment of the quasi-dominant portion, then upon a severance of the ownership a grant or reservation of the right to continue such use arises by implication of law. 17A Am.Jur. 652-658, Easements, §§ 41-45; 28 C.J.S. *564 Easements §§ 30-34, pp. 686-695. See, for example, an excellent opinion by the late Commissioner Van Sant in Sievers v. Flynn, 1947, 305 Ky. 325, 204 S.W.2d 364. The continued use of an existing public utility is necessary to the enjoyment of the other properties served by it, or reasonably expected to be so served, and thereby presents a perfect example for the application of the foregoing principle.
The judgment correctly decided that the subdivision developers had not parted with their ownership of the water mains and were therefore entitled to sell them to the City of Danville and receive the proceeds.
Judgment affirmed.
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242 Md. 323 (1966)
219 A.2d 77
JONES
v.
STATE
[No. 71, September Term, 1965.]
Court of Appeals of Maryland.
Decided April 27, 1966.
The cause was argued before PRESCOTT, C.J., and MARBURY, OPPENHEIMER and McWILLIAMS, JJ., and CHILDS, J., Associate Judge of the Fifth Judicial Circuit, specially assigned.
Thomas F. Dempsey, with whom was James A. Ehrhart on the brief, for appellant.
R. Randolph Victor, Assistant Attorney General, with whom were Thomas B. Finan, Attorney General, Charles E. Moylan, Jr. and Malcolm Kitt, State's Attorney and Assistant State's Attorney, respectively, for Baltimore City on the brief, for appellee.
MARBURY, J., delivered the opinion of the Court. McWILLIAMS, J., dissents.
The appellant, Charles W.A. Jones, was found guilty of robbery in the Criminal Court of Baltimore, by Judge Dulany Foster, sitting without a jury, and was sentenced to thirty months in the Maryland Correctional Institution for Men. The appellant's sole contention on this appeal is that the evidence adduced below was insufficient to justify the trial judge's verdict of guilty.
At the trial, Lucy Schorback, the prosecuting witness, testified that on January 7, 1965, at 12:55 in the afternoon she was walking in the vicinity of the 100 block of Mulberry Street, near the Enoch Pratt Free Library, when three men approached her from the rear and one of them grabbed her shopping bag, which contained food and personal items, including a handbag containing approximately $200. The witness testified that the person who had grabbed the shopping bag wore a coat which she described as being "between a brown and a *325 tan" in color and that the defendant "looked like" that man although she did not testify that he was one of the robbers.
Shortly after the above incident, and less than a block from where it had occurred, Joseph Cziwinski, a taxicab driver, was stopped at the intersection of Park Avenue and Mulberry Street, waiting for the traffic light to change. As the light turned green, he saw three Negro boys dash in front of his cab running in a westerly direction across the intersection, and then run into an alley north from Mulberry Street. Although he did not get a good look at the boys' faces he did notice their heights and that one of them had on a black leather jacket, one had a brown jacket, and he was unable to say how the third was dressed. The cab driver, continuing in a northerly direction, drove to Franklin Street where he made a left turn and then proceeded in the direction of Howard Street. Arriving at Tyson Street he then saw the same three youths emerging from the alley and observed the boy in the black leather jacket with a woman's purse, which he was in the process of "sticking" under his jacket.
The driver then sounded his horn in order to alert a traffic policeman, who was stationed at the corner of Howard and Franklin Streets. At the sound of the horn, according to Cziwinski, the three boys disbanded, two of them going north on Tyson Street, while the third, whom the witness identified in the courtroom as the defendant Jones, walked west, over to the north side of Franklin Street. Jones was immediately apprehended at Howard Street after Cziwinski had informed the arresting officer that "* * * there is one of the three boys that was running down the street, one of them was sticking a pocketbook into his coat." The witness Cziwinski further testified that he could positively identify Jones as one of the youths who had run in front of his cab at Park Avenue and Mulberry by the appearance of his clothes, more particularly the brown jacket which he was wearing at the time he was apprehended.
The only witness who was called to testify for the defense was the twenty year old defendant himself, who, despite his youth, had already been previously convicted of burglary and larceny. Jones testified that he had been job hunting on January 7, 1965, and in the course of his search was walking in *326 the vicinity of Mulberry Street when he observed a boy grab the prosecuting witness' shopping bag. Defendant Jones testified that he chased the boy into the alley whereupon he noticed another boy running with the first, and that he chased both of them until one ran into a side alley, while the other continued straight. According to Jones he chased one of the boys until he came out onto Franklin Street. He stated emphatically that he did not know either of the boys whom he was chasing and that he had "nothing at all" to do with the crime of which he was accused.
It is our view that four factors, taken together, support the finding by the trial judge that the appellant committed the crime of which he was convicted. Those four factors are: (1) Appellant's presence at the scene of the crime; (2) prosecuting witness' testimony as to the similarity of identity between the defendant and the man who grabbed her shopping bag; (3) appellant's running from the scene of the crime; and (4) appellant's presence with another youth who was attempting, while in the process of fleeing from the scene of the crime, to secrete an item of the kind which was missing from the victim's shopping bag.
In regard to the first factor, the appellant's own testimony placed him at the scene of the crime. Judge Prescott, now Chief Judge, speaking for this Court in Tasco v. State, 223 Md. 503, 509, 165 A.2d 456, used the following language, which is apposite here, in discussing this factor:
"Of course, it is elementary that the mere presence of a person at the scene of a crime is not, of itself, sufficient to establish that that person was either a principal or an accessory to the crime. (Italicized in original.) Watson v. State, 208 Md. 210, 117 A.2d 549; Judy v. State, 218 Md. 168, 146 A.2d 29. But presence at the immediate and exact spot where a crime is in the process of being committed is a very important factor to be considered in determining guilt; and in this case the trial court was not required to believe that the appellants were mere observers of a crime that was being committed, nor that it is a case where a crime had been committed one hour, one day *327 or one week before, and the defendants happened, by chance, to come to the place where the crime had been committed." (Emphasis added.)
With respect to the second factor, we may assume that the prosecuting witness' testimony that the appellant "looked like" the person who took her bag, coupled with her testimony that the man had on a "brown or tan" coat was again not sufficient, standing alone, to justify conviction of this crime. Cf. Wesbecker v. State, 240 Md. 41, 212 A.2d 737; Barbee v. State, 239 Md. 329, 211 A.2d 343; Booker v. State, 225 Md. 183, 170 A.2d 203. But this "coincidence of looks" when coupled with the appellant's admission that he was at the scene of the crime, is strong circumstantial evidence of his guilt of the crime charged.
Thirdly, there was sufficient testimony from which the trier of the facts could have properly found that the defendant fled from the scene of the crime. Based on the taxicab driver's testimony, the trial judge could have found that soon after the robbery the appellant was among those who darted in front of the cab and then ran into the alley but a short distance from where the robbery had occurred. Here the cab driver's identification was based on the appellant's race, his height, and most importantly on the brown jacket he was wearing. The means of identification used here by Cziwinski is analogous to that present in Bailey v. State, 226 Md. 353, 173 A.2d 732, where the prosecuting witness identified the accused as the perpetrator of the crime primarily by the similarity of the clothing worn by the burglar and that worn by the accused when arrested soon after, and in the vicinity of, the crime. In Bailey we held that such identification was sufficient to convict. In the instant case there can be little doubt that the defendant did run from the scene of the crime since he admitted doing so, although he characterized his movements as pursuit, rather than flight. The trial judge was not compelled to accept the appellant's asserted motive and it is plain that he did not. While flight alone is not sufficient to convict, it is universally admissible as evidence of consciousness of guilt, and thus of guilt itself. Davis v. State, 237 Md. 97, 205 A.2d 254. See also II Wigmore, Evidence § 276 (3d ed. 1940).
*328 Fourthly, the cab driver's positive testimony that he saw the accused emerging from an alley in the company of another male youth, who was also fleeing from the scene of the crime, along with his testimony that the other youth was attempting to secrete a woman's pocketbook under his jacket and the undisputed fact that a woman's pocketbook was one of the items missing from the prosecuting witness' shopping bag, was probative evidence, when coupled with the first three factors above discussed, from which the trial judge could rationally infer beyond a reasonable doubt that the accused participated in its taking.
Proof of guilt beyond all possible doubt has never been required in criminal cases, and it is thus "not necessary that every conceivable miraculous coincidence consisent with innocence be negatived." Hayette v. State, 199 Md. 140, 144, 85 A.2d 790. The test to be used by this Court in a case such as the instant one was succinctly put in Kucharczyk v. State, 235 Md. 334, 337, 201 A.2d 683, quoting from Ponder v. State, 227 Md. 570, 572, 177 A.2d 839, in the following manner:
"`* * * the test of the sufficiency of the evidence in a case tried before the court without a jury, when reviewed in this Court, is whether the evidence, if believed, either shows directly or supports a rational inference of the facts to be proved, from which the court could fairly be convinced, beyond a reasonable doubt, of the defendant's guilt of the offense charged.'"
For the reasons set forth above, we conclude that this test was fulfilled, and affirm the judgment.
Judgment affirmed.
McWILLIAMS, J., dissents.
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242 Md. 399 (1966)
219 A.2d 37
BUNN
v.
WARDEN OF MARYLAND HOUSE OF CORRECTION
[App. No. 67, September Term, 1965.]
Court of Appeals of Maryland.
Decided April 28, 1966.
*400 Before PRESCOTT, C.J., and HAMMOND, HORNEY, MARBURY and BARNES, JJ.
HAMMOND, J., delivered the opinion of the Court.
Charles Edward Bunn was convicted of larceny of an automobile by Judge Harris in the Criminal Court of Baltimore and sentenced to five years in the Maryland House of Correction. No appeal was taken. On February 17, 1965, Bunn filed a petition under the Uniform Post Conviction Procedure Act, and relief was denied by Judge Cullen.
The facts of the case are as follows: A police officer from the Millville, New Jersey, Police Department was at the location where the stolen car was stuck in the mud on the side of the road when the petitioner, a friend, and the friend's seventeen-year-old son drove up in a truck with the expectation of pulling the car from the mud. The arrest of petitioner was made on the basis of a flyer issued by the Federal Bureau of Investigation which was known to the arresting officer. During the conversation which followed at the police station, the police officer "may have said that we could probably hold the boy for helping him [petitioner] get the car out of the woods." Petitioner replied that he did not want to involve the boy and then he stated that he had taken the car in Baltimore.
Petitioner's first contention is that his confession was induced by threats. The question was considered by Judge Cullen at the hearing, and after a careful review of the transcript of the trial, he concluded that petitioner's oral statement was not induced by threats and was admissible as a voluntary confession.
Petitioner next contends that he did not have the assistance of counsel at the time he made the confession and he was not warned of his right to counsel. The circumstances of this case are outside the facts of Escobedo v. Illinois, 378 U.S. 478, 12 L. Ed. 2d 977. At the hearing, petitioner admitted that he did not request counsel while being questioned by the police. Since the statement was given voluntarily, it was admissible. Hyde v. State, 240 Md. 661, 664, and cases cited therein.
When the trial judge sought information about the grounds on which the arrest had been made without a warrant, the contents of the F.B.I. flyer were put into evidence without objection *401 and revealed that petitioner was wanted on the charges of breaking and entering, grand larceny, and interstate flight. Petitioner contends that this amounted to putting his prior criminal record in evidence. Judge Cullen dismissed this contention by noting that the flyer made references to crimes petitioner was accused of but not convicted of; therefore there was no introduction of a prior record. The admission of the testimony was proper since it was admitted to allow the judge to determine whether the arrest without a warrant was made with probable cause to believe that a felony had been committed and that the person arrested had committed it. Farrow v. State, 233 Md. 526; Bichell v. State, 235 Md. 395 (where F.B.I. agents arrested a suspect in response to an official request of the Baltimore City police that he be apprehended).
Petitioner's final contention relates to the weight and sufficiency of the evidence to convict. In particular, he states that the police officer's testimony was uncorroborated and the State did not establish a prima facie case. It has been stated innumerable times that such a contention must be raised on appeal and not in post conviction proceedings since post conviction relief is reserved only for the type of claim set out in Code (1965 Supp.), Art. 27, § 645A. See, e.g., Young v. Warden, 233 Md. 596; Brown v. Warden, 240 Md. 710. Petitioner does not allege that he was deprived of his right to appeal.
Application denied.
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219 A.2d 148 (1966)
WILMINGTON HOUSING AUTHORITY, a public body corporate and politic, organized and existing under the laws of the State of Delaware, Plaintiff Below, Appellant,
v.
The Following PARCEL OF LAND, with the Buildings and Improvements thereon erected, Situate IN the CITY OF WILMINGTON, COUNTY OF NEW CASTLE and State of Delaware.
Herbert M. Ames and Lillian J. Ames, his wife, Owners, Pack & Process, Inc., a corporation of the State of Delaware, et al., Lessees, Defendants Below, Appellees.
Supreme Court of Delaware.
April 4, 1966.
Thomas Herlihy, Jr., Thomas Herlihy, III, and Morris Cohen, Wilmington, for appellant.
James M. Tunnell, Jr., of Morris, Nichols, Arsht & Tunnell, Wilmington, and William D. Bailey, Jr., of Bayard, Brill, Russell & Handelman, Wilmington, for appellees.
WOLCOTT, Chief Justice, CAREY, Justice, and SHORT, Vice Chancellor, sitting.
*149 WOLCOTT, Chief Justice.
This is an appeal by the Wilmington Housing Authority from the final confirmation of an award by Commissioners sitting in the Superior Court in condemnation proceedings. The award was for just compensation for the taking by the Authority of almost an entire city block with several substantial buildings thereon, the property of the individual defendant, Ames.
The Authority attacks the inclusion by the Commissioners in the award of the value of fixtures consisting of large and heavy pieces of machinery used by the defendant, Pack & Process, Inc., in its business of processing and packaging dry products.
Ames and his wife are presently the sole owners of Pack & Process, Inc., although originally they owned only 50% of that corporation. It operates under a lease with Ames expiring in 1968. The nature of the business of Pack & Process, Inc. is that of a contract packer. Such a packer is called on by manufacturers whose own packaging capacities are limited, to supply immediate packaging capacity. This means that the machinery of a contract packager must have the capacity to permit the packer to diversify his operation. Such a plant requires a flexibility ordinarily not available in the manufacturer's own plant.
Packaging machinery utilizes complicated mechanisms at high speeds which require many and delicate adjustments for proper operation. Many items of this type of machinery are exceedingly large and the moving of them may be accomplished only with great difficulty and expense. Furthermore, when such a machine is dismanteled and moved, the readjustment of its delicate mechanisms is fraught with difficulty and oftentimes is impossible to attain.
The Ames property, a former brewery, is being taken by the Authority for a row-housing project. This former brewery is admirably adapted for the packaging business of Ames, operated through his wholly-owned company, Pack & Process, Inc.
Ames first learned of the housing proposal in 1961 when its possibility first was made public. However, for a period of time in fact, until just before the institution of this condemnation action the taking of the Ames property was never definitely decided upon by the Authority, at least publicly. On the contrary, throughout a period of about four years, whether or not the housing project would go forward was a matter of considerable doubt.
Throughout this period, because of constantly increasing demands upon his packaging facilities from manufacturers, Ames gradually increased his productive capacity through the acquisition and installation of additional machinery. This machinery was *150 installed on the premises in question, rather than upon a new location, because of the inability of Ames to find out whether the property would be taken.
At the trial witnesses called by the defendants testified that, while any piece of machinery, no matter what its size, can be moved given the necessary manpower and money, nevertheless, it was impractical to move the machinery in question because it could not be reassembled readily to perform the task for which it is designed. All of this machinery is attached to the buildings, either by bolts or water lines, electric cables, air hoses, etc. Nevertheless, all of the attaching devices can be disconnected from the machines which, thereafter, could, with a maximum amount of effort, be moved to a new location.
These facts were testified to by expert witnesses called by both sides. The fundamental disagreement among these experts relates to the reassembling of the machines if they should be moved. Ames' witnesses testified that they could not be reassembled and adjusted in any reasonable period of time, if at all. The experts of the Authority minimized the difficulties of moving and reassembling.
This is the fundamental disagreement between these litigants; the Authority arguing that, since the machinery may be removed without damage to either itself or the freehold, the law requires that they be regarded as chattels and not as fixtures to the real estate.
This Court, in Della Corporation v. Diamond, 210 A.2d 847, had occasion to approve the principles governing the determination of whether or not a chattel had become a fixture laid down in Warrington v. Hignutt, 3 Terry 274, 31 A.2d 480.
In that case the rule was laid down that a fixture is a chattel which, by reason of its annexation to the real estate, is regarded in law as a part of the real estate. In determining whether or not a chattel has been sufficiently annexed to the realty to become a fixture, the controlling test is the intention of the party making the annexation as disclosed by the surrounding circumstances. To determine this intention, various factors should be considered. Thus, the nature of the chattel, the mode of its annexation, the purpose or use for which the annexation has been made, and the relationship of the annexor to the property, are all to be considered and weighed in determining the question of intention.
No one factor is necessarily controlling. The Wilmington Housing Authority argues that since the machinery was removable, that necessarily determines the issue, but we think not. Removability alone, while significant, is not controlling, as to what the intention of the annexor was. The true test, we think, is whether or not the chattel was affixed to the realty for a temporary or a permanent purpose. Watertown Steam Engine Co. v. Davis, 5 Houst. 192; Equitable Guarantee & Trust Co. v. Knowles, 8 Del. Ch. 106, 67 A. 961; Martindale v. Bowers Beach Corp., 13 Del. Ch. 288, 118 A. 299.
The trial judge in his instructions to the Commissioners adequately, we think, told them how to determine whether a chattel had become a fixture or not. He, quite properly, instructed them that it was a matter of intention on the part of the annexor. He properly told them what factors they should consider in order to determine what, in fact, the annexor's intention was.
The evidence before the Commissioners, particularly the evidence offered by Ames, was sufficient to support their finding that Ames intended the installation of this machinery to be permanent. This finding meets the test laid down in this State as to whether or not a chattel has, in fact, become a fixture.
The Authority takes exception to this finding, apparently as a matter of law, or, in the alternative, that all of the facts require *151 a finding that the installation was to be temporary only.
We have already referred to their argument based upon the removability of this machinery but we think it pushes the argument too far. While the machinery is removable, it is not to be removed easily and properly. We think that a person installing and intending to operate massive machinery of this kind in an adequate location probably intended at the time of installation that the installation would be permanent. This conclusion is simple common sense.
The Authority next argues that since the machinery was owned by the corporation, Pack & Process, Inc., which was only a tenant of the premises, that this fact precludes a finding of intention on the part of Pack & Process, Inc., to make a permanent installation since its occupancy of the premises was of a temporary nature under a lease.
This, however, is to ignore the fact that the lease held by Pack & Process, Inc., had a number of years to go. Furthermore it is, we think, reasonable to conclude that the lease between Ames and his wholly-owned corporation, Pack & Process, Inc., would have been renewed and extended from time to time, if necessary. The ownership by the landowner of the corporate tenant is of great significance in determining whether or not the intention at the time the machinery was installed was to make it permanent or temporary. We think the Commissioners were justified in finding that Ames intended to install permanently through his wholly-owned corporation this machinery, and that the machinery actually installed would have remained there permanently but for the taking by the Authority. Therefore, it follows that Ames, or Pack & Process, Inc., is entitled to be compensated for these fixtures taken by the condemning Authority.
The most the Housing Authority has demonstrated in this appeal is that there is a possibility of difference of opinion between reasonable men as to whether or not these items of machinery had become fixtures. Conceding this fact, nevertheless the Commissioners found against the factual contention of the Housing Authority which finding is based upon competent and sufficient evidence. This Court will not disturb the factual finding of the Commissioners based upon proper evidence.
The Authority, however, argues that the judgment should be reversed and the cause remanded for a new trial by reason of certain allegedly improper remarks made by counsel for Ames in his summation to the Commissioners. The complained of remarks commenced with a recitation of the growth of Ames' packaging business and his leasing of portions of the premises to other concerns. As a result of the discussions concerning the possibility of an urban renewal project in this area, one tenant failed to renew its lease and another prospective tenant did not enter into a lease because of the uncertainty as to the duration of time the premises would be available. This particular series of remarks then culminated in the following quotation:
"However, the real pressure and difficulty here developed from the fact that they talked but they didn't take. That is the thing that I think maybe we could lose sight of in light of this case. There was talk and talk, but in taking, this suit was never even filed until January 13, 1965.
"If they had gone ahead and taken it in 1962, that would have been something else again, but what is a man, what is a businessman to do, what would you do, as business people, if you had a property and you didn't have it? You were neither fish nor fowl. Would you find yourself the capital to go out and buy another plant and, too, begin to move gradually from this site to some other site? And if you did that you might have a little problem about laying out the money for two plants.
"I don't know about that, but then suppose you did this and they didn't take? *152 Suppose they come along and said, `We have changed our minds.'
"The wisdom of this whole project is such, I think, that a person never could have been sure, until it was accomplished, that it would go through.
"You can see the debatable features of it which are not issues in this case which would make you wonder about the wisdom of the project, and suppose they didn't take."
We think the complained of remarks do not amount to such prejudicial error as to require the referral back of this cause for a new trial. Throughout the trial the Authority had complained that Ames, since knowing in 1961 of the possibility of the condemnation, had kept right on installing machinery in the premises as his business grew, and then sought compensation from the Authority for such machinery installed during the period of time when the taking of the property was imminent. Also, the Authority charged Ames with neglecting many aspects of maintenance.
Counsel for Ames contends that the remarks were made in explanation of the complaints of the Authority of Ames' conduct in this respect. He argues that it was not only proper but necessary for him to point out to the Commissioners the reason why these matters had been done. As to questioning the wisdom of the project, he says he did not do this with the intention of inflaming the Commissioners, but merely to emphasize the uncertainty of the fact that condemnation of the property would ever take place. His argument is that, in view of the uncertainty of the taking, which, in part at least, was caused by doubts as to the wisdom of the project, Ames could not permit his business to stagnate, but, on the contrary, was compelled by its requirements to permit it to expand. Indeed, the failure on his part to do so would have been an unwarranted reliance by him upon rumors and uncertainties. For his own protection, he was required to do precisely what he did do.
In any event, we think the remarks not objectionable to such an extent as to require the overturning of the award and the granting of a new trial.
Next, the Housing Authority complains of the following remarks of counsel:
"Therefore, you could do very grave injury to Mr. Ames if you were to make a mistake against him, and if you were to make a mistake against the Housing Authority under their theory of the facts, it would not be a very serious error."
In the context of the trial which had taken place before the Commissioners, and the contentions of both sides concerning the nature of this machinery that is, whether it was fixture or chattel and in view of the many repetitious statements of the position of the Authority to the effect that the machinery could be removed and resold, we think it was permissible to argue the point before the Commissioners.
We do not regard these remarks as an invitation to load the award against the Authority and in favor of Ames. On the contrary, we think it permissible argument on the facts and an argument designed to point out to the Commissioners inferences which could be made to aid them in determining the facts.
Furthermore, the trial judge instructed the Commissioners that if they should determine that the machinery was in fact fixtures, then Ames was entitled to be awarded the reasonable value of them if they were in place. If, on the other hand, the Commissioners should find that the items were not fixtures, then they were instructed that they would remain on the property subject to the right of Ames to remove them but that, in that event, they could make no award either for the *153 value of the machinery or for the cost of its removal.
This, we think, is what counsel's remarks were directed to. They were intended to point out that if the machinery was held to be not fixtures, the consequences to Ames might be expenses equal to the value of the machinery. As such, counsel was pointing out the consequences of a wrong decision. This, we think, was proper comment. While his remarks may not have been as precise upon this point as may now in retrospect be considered desirable, they, nevertheless, were directed to that issue, and we think were not improper to a degree to require the granting of a new trial.
For the foregoing reasons, therefore, the judgment below is affirmed.
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50 B.R. 785 (1985)
In re Lawrence B. GREENE and Helena Greene, Debtors.
Bankruptcy No. 85-B-20159.
United States District Court, S.D. New York.
July 10, 1985.
*786 Rudolph W. Giuliani, U.S. Atty., New York City, for I.R.S.; Alan Nisselson, Asst. U.S. Atty., of counsel.
Lawrence B. Greene & Helena Greene, pro se.
HOWARD SCHWARTZBERG, Bankruptcy Judge.
The Internal Revenue Service ("IRS") seeks a modification of a default order dated May 2, 1985 restraining the IRS from enforcing and further issuing compliance and administrative summonses to obtain information and data from banking institutions for the purpose of determining the correctness of federal income tax returns filed by the debtors.
On March 28, 1985, the debtors, Lawrence B. Greene and Helena Greene, who are husband and wife, filed with this court their joint petition for an adjustment of their debts pursuant to Chapter 13 of the Bankruptcy Code. On May 1, 1985 the debtors' motion entitled "Notice of Motion to Stop Harassment and Demanding of Papers" was scheduled for hearing. Due to some mistake the United States Attorney's office failed to appear in opposition to the debtors' motion with the result that a default order was entered on May 2, 1985 directing that, pursuant to the automatic stay imposed under 11 U.S.C. § 362(a), the IRS was stayed from undertaking any collection matters for prepetition obligations involving the debtors during the pendency of their bankruptcy case. The IRS now seeks to modify the default order so as to provide that the stay imposed by 11 U.S.C. § 362(a) and the May 2, 1985 order of this court shall not affect the issuance of, and compliance with, administrative IRS summonses issued to any banks for purposes of gathering information concerning tax obligations of the debtors.
The IRS is authorized under 26 U.S.C. § 7602 of the Internal Revenue Code to "examine any books, papers, records, or other data which may be relevant or material" to an inquiry into "the correctness of any return." The summons power gives the IRS the authority necessary for the effective enforcement of the revenue laws. United States v. Euge, 444 U.S. 707, 715-16, 100 S. Ct. 874, 880, 63 L. Ed. 2d 141 (1980). Third parties who have records pertaining to the income tax liabilities of taxpayers usually include banks and other financial institutions, consumer reporting agencies, persons extending credit, brokers, attorneys, accountants and barter exchanges, are referred to as third-party recordkeepers in 26 U.S.C. § 7609(a)(3). In view of the fact that third-party recordkeepers are not the real parties in interest and have little incentive to raise objections to summonses issued in connection with the *787 investigation of tax liabilities of specific taxpayers, provision is made for notice to be given to the taxpayers under investigation pursuant to the issuance of third-party recordkeeper summonses, accompanied by a copy of each summons. 26 U.S.C. § 7609(a)(1).
In the instant case, third-party recordkeeper summonses were issued to banks for the production of records pertaining to the debtors' financial records and for the records of a corporation with respect to which the debtors had a financial interest. The debtors contend that the issuance of these third-party recordkeeper summonses constitute harassment and violate the automatic stay imposed under 11 U.S.C. § 362(a).
The automatic stay proscribes the commencement or continuance of actions, including the issuance of process, to recover prepetition claims against debtors. 11 U.S.C. § 362(a)(1). The automatic stay also enjoins the enforcement of any liens against property of the estate. 11 U.S.C. § 362(a)(4). Acts to collect or assess prepetition claims against a debtor are enjoined. 11 U.S.C. § 362(a)(6). Similarly, the setoff of prepetition debts owing to the debtor is stayed. 11 U.S.C. § 362(a)(7). The IRS is subject to the automatic stay with respect to prepetition claims along with all other creditors of a debtor and is therefore prevented from setting off any tax refunds owed to a debtor against income taxes owed by the debtor. In re Coleman American Cos., Inc., 10 B.C.D. 185, 26 B.R. 825 (Bkrtcy. D.Kan.1983); In re Norton, 8 B.C.D. 647, 15 B.R. 623 (Bkrtcy.E.D.Pa.1981), aff'd, IRS v. Norton, 717 F.2d 767 (3rd Cir.1983); In re Harris, 8 B.C.D. 1338, 19 B.R. 624 (Bkrtcy.E.D.Pa. 1982); In re Holcomb, 8 B.C.D. 1236, 18 B.R. 839 (Bkrtcy.S.D.Ohio 1982).
The third-party recordkeeper summonses issued by the IRS do not constitute the commencement of actions against the debtors to recover prepetition taxes owed by the debtors nor do they purport to effect the collection of prepetition taxes owed by them. No lien enforcement is involved and no property of the debtors is taken. The automatic stay was not intended as a refuge for debtors from IRS examinations of third parties with respect to the tax liabilities of the debtors. This point was stated as follows in United States v. Arthur Andersen & Co., 623 F.2d 725, 728 (1st Cir. 1980):
Not only do we see no statutory or case authority supporting the proposition that IRS loses its authority to investigate under a summons simply because an investigatee has come within the jurisdiction of a bankruptcy court, but we discern no supporting reasons of policy.
* * * * * *
Indeed, were the proposition to be valid, we could envisage asylum sorties into bankruptcy whenever the IRS chase became too hot.
In view of the fact that the IRS summonses were issued to third parties for their records and data and not to the debtors, the restraints imposed under the automatic stay, so as to allow the debtors an opportunity to proceed with their Chapter 13 case, are not violated. Accordingly, while the IRS is subject to the automatic stay with respect to all collection matters for prepetition tax liabilities of the debtors during the pendency of their bankruptcy case, unless relief is obtained under 11 U.S.C. § 362(d), such stay and the previous order of this court do not enjoin the issuance and compliance with IRS third-party recordkeeper summonses directed to banks for purposes of gathering information concerning the tax obligations of the debtors. The IRS is entitled to the entry of an order modifying the May 2, 1985 order so as to make clear that the reach of the automatic stay does not extend to the third-party recordkeeper summonses in question.
SUBMIT ORDER in accordance with the foregoing.
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886 S.W.2d 859 (1994)
Billy Gene TURNER, Jr., Appellant,
v.
The STATE of Texas, Appellee.
No. 09-93-135 CR.
Court of Appeals of Texas, Beaumont.
November 9, 1994.
*862 John C. Connolly, Houston, for appellant.
Michael R. Little, Dist. Atty., Liberty, for state.
Before WALKER, C.J., and BROOKSHIRE and BURGESS, JJ.
OPINION
WALKER, Chief Justice.
This is an appeal from a conviction for the felony offense of Murder. The indictment contained several enhancement paragraphs raising appellant's punishment status to that of a habitual offender. Following its verdict of "guilty," and a finding of "true" with regard to the habitual offender allegations, the jury assessed appellant's punishment at confinement in the Institutional Division of the Texas Department of Criminal Justice for a term of ninety-nine (99) years. Appellant raises ten points of error for our consideration.
Appellant's first two points of error aver the following:
Point of Error I: The trial court erred in failing to grant appellant's oral motion to suppress the search warrant of appellant's residence in violation of U.S. Const. Amend. IV. (sic) and Tex.Code Crim.Proc. Art. 18.04, 18.06.
Point of Error II: The trial court erred in failing to grant appellant's oral motion to suppress the search warrant of appellant's residence in violation of Tex. Const. Art. I § 9 and Tex. Code Crim.Proc. Art. 18.04, 18.06.
It is clear by the language of points of error one and two that appellant is attempting to comply with that portion of Heitman v. State, 815 S.W.2d 681, 690-691, n. 23 (Tex. Crim.App.1991), which provides:
Attorneys, when briefing constitutional questions, should carefully separate federal and state issues into separate grounds and provide substantive analysis or argument on each separate ground. If sufficient distinction between state and federal constitutional grounds is not provided by counsel, this Court may overrule the ground as multifarious.
However well intentioned, appellant nevertheless creates some confusion as his first point of error, alleging trial court error violative of federal constitutional law, also contains a reference to the Texas code of criminal procedure. Furthermore, with regard to addressing the two specific complaints [the warrant predating the affidavit and the fact that the affidavit was not attached to the warrant when said warrant was served on appellant], appellant makes no attempt to explain how the Fourth Amendment of the United States Constitution ties in with arts. 18.04 and 18.06 of the Texas Code of Criminal Procedure. In other words, appellant has not "carefully separate[d] federal and state issues" so that we are able to determine that he is attempting to show a clear distinction between the two. As stated by the Court of Criminal Appeals in Arnold v. State, 873 S.W.2d 27, 33, n. 4 (Tex.Crim. *863 App.1993): "The briefs should show how constitutional protection differs under the state constitution as opposed to the protection provided by similar provisions in the federal constitution." Other than acknowledging that the Fourth Amendment contains different wording from that of art. I, § 9, appellant makes no further attempt to provide substantive distinctions. Because appellant has failed to substantively indicate how his protection under the Texas Constitution exceeds or differs from that provided to him by the Federal Constitution, we will not address appellant's state constitutional argument. Arnold v. State, 873 S.W.2d at 33.
With regard to appellant's federal constitutional issues, we note that other than two United States Supreme Court cases standing for the proposition that evidence obtained in violation of the Fourth Amendment is to be excluded at trial, and that said exclusionary rule is applicable to the states through the Fourteenth Amendment, appellant provides no federal authority for relief from his alleged deprivation of Fourth Amendment rights. As such, appellant has inadequately briefed point of error one as to any federal constitutional violation and we decline to address said issue. Tex.R.App.P. 74(f). Point of error one is overruled.
The only issue remaining under either point of error one or two is the claim of Texas statutory violation as to Tex.Code Crim.Proc.Ann. arts. 18.04 & 18.06 (Vernon 1977 & Vernon Supp.1994). On the issue of the warrant predating the affidavit, the record reflects that the date the warrant was purportedly issued is typed in as the "17th" day of September, 1989. The affidavit supporting the issuance of said warrant was sworn to before Montgomery County District Court Judge James Keeshan on the "18th" day of September, 1989. Testimony was elicited from Captain Robert Dunn of the Liberty County Sheriff's Office. Captain Dunn drew up the affidavit and the warrant and presented each to Judge Keeshan who authorized issuance of said warrant. During a voir dire examination of Captain Dunn by defense counsel, the following testimony was recorded:
Q. (Defense Counsel) Let me tell you why I am asking you these questions, sir. You have got an affidavit there dated the 18th day of September, 1989, correct?
A. (Captain Dunn) Are you talking about on the front page?
Q. Whatever date is on the affidavit, sir.
A. Okay.
Q. Then you have got a search warrant attached that's dated the 17th day of September, 1989.
A. Yes, sir, I am aware of that, too.
Q. Would that mean the search warrant was issued first?
A. No, sir.
Q. Well, what would it mean?
A. When we started drafting this search warrant affidavit, search warrant, and the return part, it was on the 17th day of September, 1989.
Q. All right.
A. It was typed in as such.
Q. All right.
A. The 18thwhere you see the 18th was left blank. When after midnight we did not go back and change this 17 to 18. The blank part on the affidavit, when it wasI swore to it in front of Judge Keeshan and he accepted it, he filled in the blank 18th.
Q. Well, did he fill inWho filled in the blank on the search warrant?
A. It is not a blank, sir, it is typed in.
Q. Who filled that in?
A. It was filled in as we were drafting this paper work at the Sheriff's Department.
Q. Are you telling us that Judge Keeshan signed an affidavit dated the 18th and then signed the search warrant the 17th?
A. Well, I am saying this complete packet was taken to him that morning of the 18th, was presented to him and he affixed his signature to them.
Based upon the record before us, it is clear that the process of drafting the warrant began late September 17 and carried into the next day, September 18. Apparently through inadvertence no one caught the typed-in date of "17th" on the warrant. Nevertheless, Captain Dunn's testimony is sufficient *864 to assure us that both affidavit and warrant were presented to Judge Keeshan at the same time on September 18. The Court of Criminal Appeals addressed the issue of typographical errors in search and arrest warrants in Daena April Green v. State, 799 S.W.2d 756 (Tex.Crim.App.1990). Observing that "[t]his kind of error will not vitiate either an arrest or search warrant," the Green Court set out the following explanation:
The two objectives of the law concerning search warrants are to ensure there is adequate probable cause to search and to prevent a mistaken execution of the warrant against an innocent third party. Bridges v. State, 574 S.W.2d 560 (Tex.Cr. App.1978). These objectives are not furthered by rigid application of the rules concerning warrants; as this Court has previously stated, "(We) are convinced that the rights of society and of the innocent third party can best be protected by evaluating each search warrant individually." Id. at 562. Just as we will evaluate the encompassing issue of probable cause by measuring the factual sufficiency of an affidavit and warrant by the "Totality of Circumstances" test enunciated in Illinois v. Gates, 462 U.S. 213, 103 S. Ct. 2317, 76 L. Ed. 2d 527 (1983), so do we review technical discrepancies with a judicious eye for the procedural aspects surrounding issuance and execution of the warrant. To do otherwise would defeat the purpose behind the warrant requirement, and provide protection for those to whom the issue on appeal is not one based upon the substantive issue of probable cause but of technical default by the State.
Green, 799 S.W.2d at 757-758. In the instant case, we agree that the evidence sufficiently explains the reason for the warrant predating the affidavit as being that of inadvertence. Such a technical error will not invalidate the warrant under either art. 18.04(2) or (3) as appellant argues.
Appellant next maintains that because the warrant and the affidavit were not physically attached, the warrant failed to meet the requirements of art. 18.06(b), which provides in pertinent part:
On searching the place ordered to be searched, the officer executing the warrant shall present a copy of the warrant to the owner of the place, if he is present.
At the outset, we take note that the record before us reflects the following: that appellant was served a copy of the warrant prior to the search, and was presented with a written inventory of the items seized following the completion of the search; that the warrant itself did not contain the address of the premises to be searched; that it did not name the person alleged to be in charge of the premises; and that it did not describe the items or property to be searched for and seized. Appellant is correct in his contention that a warrant that does not contain the basic information required by art. 18.04 can nevertheless be valid so long as the warrant incorporates by reference the affidavit and said affidavit does contain all of the information required by art. 18.04. Additionally, appellant insists, Texas law mandates that in such situations validity of the warrant requires that the affidavit also must be physically attached to the warrant. Appellant's contention that the affidavit in question was not "expressly made a part of the warrant" is incorrect as the warrant states on its face, in pertinent part: "Whereas, the Affiant whose signature is affixed to the Affidavit attached hereto and expressly made a part hereof, ...." (emphasis added).
We see appellant's complaints as analogous to those made in the three following cases, Othar Glen Green v. State, 880 S.W.2d 198 (Tex.App.Texarkana 1994, no pet.); Gonzales v. State, 743 S.W.2d 718 (Tex.App. Houston [14th Dist.] 1987, pet. ref'd); and Robles v. State, 711 S.W.2d 752 (Tex.App. San Antonio 1986, pet. ref'd). In all three cases, the authorities failed to comply with the specific requirement of art. 18.06(b). In Othar Glen Green, the defendant was not provided a copy of the search warrant prior to the search taking place, although the warrant had been issued and was en route to the search scene. In Gonzales, the warrant failed to contain the required art. 18.04 language but did expressly incorporate the "attached affidavit." In Gonzales, as in the instant case, the affidavit was not attached to *865 the search warrant served upon the defendant prior to the search. In Robles, the search warrant was read to those present at the search scene but no written copy was given to anyone and, although an inventory of the items seized was prepared and a return made to the issuing magistrate, no copy of the inventory was given to anyone at the premises searched.
Relying on the two objectives of the law concerning search warrants discussed supra in Daena April Green v. State, 799 S.W.2d at 757-758, the Othar Glen Green court found that those objectives were not furthered by a "rigid application of the rules concerning warrants, thus we review technical discrepancies with a judicious eye for the procedural aspects surrounding issuance and execution of the warrant." Othar Glen Green v. State, 880 S.W.2d at 201.
The Court of Appeals in Othar Glen Green as well as the Gonzales court relied on Robles in finding no error stemming from the technical violations of art. 18.06(b). All three cases held that such ministerial violations of the search warrant statute do not vitiate an otherwise valid search absent a showing of prejudice or harm to the defendant. Othar Glen Green, 880 S.W.2d at 201; Gonzales, 743 S.W.2d at 720; Robles, 711 S.W.2d at 753. With regard to the instant case, art. 18.06 does not require that the affidavit be served upon the owner of the premises to be searched, only the warrant and the written inventory. Logically, under the rationale discussed above concerning ministerial violations, if there is no violation of the search warrant statute, there can be no ministerial violation by the authorities in not providing appellant with a copy of the affidavit in question. At any rate, based upon the testimony of Captain Dunn, we find that the "procedural aspects surrounding the issuance and execution of the warrant" ensured that adequate probable cause existed for the search and that sufficient prophylactic measures were taken to protect the privacy rights of innocent third parties. We find no violation of either art. 18.04 or art. 18.06. Point of error two is overruled.
Points of error three and four complain as follows:
Point of Error III: The trial court erred in failing to grant a mistrial after the State introduced evidence that appellant was on parole at the time of the offense in violation of Tex.R.Crim.Evid. Rule 404(b) and U.S. Const. Amd. V.
Point of Error IV: The trial court erred in failing to grant a mistrial after the State introduced evidence that appellant was on parole at the time of the offense in violation of Tex.R.Crim.Evid. Rule 404(b) and Tex. Const. Art. I § 13.
In briefing points of error three and four, appellant again fails to carefully separate and sufficiently distinguish between state and federal constitutional issues. Specifically, he again fails to substantively indicate how his Texas Constitution protections exceed or differ from any provided to him under the United States Constitution. Relying on the language in Arnold v. State, 873 S.W.2d at 33, we decline to address any state constitutional issue.
Appellant has also again inadequately briefed his federal constitutional issue as the entirety of his "argument and authorities" consists of the following:
U.S. Const. amd. V requires that "No person shall ... be deprived of life, liberty or property, without due process of law. This protection is applicable to State prosecutions. (sic) Malloy v. Hogan, 378 U.S. 1, 84 S. Ct. 1489 [12 L. Ed. 2d 653] (1964).
By no stretch of the imagination is this a "discussion of the facts and the authorities relied upon as may be requisite to maintain the point at issue[,]" when the point at issue complains of the admission of an extraneous offense during the guilt/innocence phase of the trial. Tex.R.App.P. 74(f). Again, we decline to address any federal constitutional claim because of appellant's briefing deficiency. Left for consideration is whether appellant is provided any relief under TEX.R.CRIM. EVID. 404(b).
Appellant directs our attention to the following portion of the record in which the State is eliciting testimony from Captain Dunn:
*866 Q. (the State) Was there anything unusual about the timing of the truck being found?
A. (Dunn) Yes, sir.
Q. What was that?
A. It was the dayor the first or second day after a hearingthis was some state officials, in relation to Billy Gene Turner, Jr.
Q. Was there some discussion at that point regarding the level of charge that was going to be filed?
A. I suggested capital murder because the truck was missing.
Q. And was the defendant or any person associated with the defendant present at that time?
A. Yes, sir.
Q. Who was that?
A. The attorney was present at that hearing.
Q. Was the defendant present?
A. Yes.
(Defense Counsel): May we approach the bench, Your Honor?
THE FOLLOWING OCCURRED OUTSIDE THE PRESENCE OF THE JURY:
(Defense Counsel): If it please the Court, he is treading all over the back that this was a parole revocation hearing.
(The State): He said there was a hearing.
(Defense Counsel): This is not admissible in this proceeding for any purpose.
The Court: You are correct.
* * * * * *
THE FOLLOWING OCCURRED IN THE PRESENCE OF THE JURY:
Q. (the State) Officer Dunn, you indicated, I believe, when the jury left, you were talking about a hearing that was held at which the defendant and his attorney were present, is that correct?
A. That is correct.
Q. During the course of that hearing was there any mention of the possibility of capital murder charges being filed in this case as opposed to murder charges?
A. Capital murder was mentioned, yes, sir.
Q. In what relation and what regard was it mentioned?
(Defense Counsel): Your Honor, I am going to object. This is hearsay.
The Court: Was the defendant there?
(The State): He already testified the defendant and his attorney were there.
The Court: Overruled.
A. (Dunn) It was in reference to the missing vehicle of the deceased.
Q. How would the vehicle have any part in determining whether capital murder charges could be filed as opposed to murder charges?
(Defense Counsel): Your Honor, again I am going to object. He is asking for a legal opinion. I don't believe he's qualified.
The Court: Overruled.
A. (Dunn) Capital murder, if there is robbery (sic) kidnapping, certain itemscertain offenses, if murder is committed during any commission of these offenses then it enhances it to a capital murder charge.
Q. And who mentioned the possibility of filing capital murder charges?
A. I did.
Q. And what did you say in the presence of the defendant and his attorney?
A. I said as long as his vehicle, we don't have no idea where it's at, as long as it is missing that is still a possibility.
Q. After the hearing, do you recall how long after that the victim's vehicle was found?
A. The next day or the day after.
It appears from the portion of the record referenced by appellant that his one quasi-objection to the State "treading all over the back" of the parole revocation hearing found sympathy with the trial court as the judge admonished both sides to refrain from getting into any matters dealing with parole. Thereafter, appellant's only objections were grounded in "hearsay" and that the State was asking for a legal opinion from an unqualified witness. No objection was made that Captain Dunn's testimony was inadmissible *867 based upon Rule 404(b). As appellant's objections at trial differ from his complaint on appeal, he has preserved nothing for review. Sterling v. State, 800 S.W.2d 513, 521 (Tex.Crim.App.1990), cert. denied, 501 U.S. 1213, 111 S. Ct. 2816, 115 L. Ed. 2d 988 (1991). Points of error three and four are overruled.
Points of error five and six contend the following:
Point of Error V: The trial court erred in instructing the jury on the law of parties where there was no evidence to support that charge in violation of the due process protections of U.S. Const. Amd. V.
Point of Error VI: The trial court erred in instructing the jury on the law of parties where there was no evidence to support that charge in violation of the due course of law protections of Tex. Const. Art. I § 13.
Again, appellant's state constitutional point is overruled for violating the dictates of Arnold v. State, 873 S.W.2d at 33, n. 4, as discussed above. Appellant's federal constitutional point is again overruled as having been inadequately briefed under Rule 74(f) as appellant provides no cases in which Fifth Amendment protection with regard to jury instructions on "parties," or "aiding and abetting" in the federal context,[1] is discussed. Points of error five and six are overruled.
Appellant's next two points of error provide:
Point of Error VII: The trial court erred in precluding the testimony of Allen Farris in violation of appellant's right to due process of law. U.S. Const. Amd. V.
Point of Error VIII: The trial court erred in precluding the testimony of Allen Farris in violation of appellant's right to due course of law. Tex. Const. Art. I § 13.
Appellant directs our attention to the following portion of the statement of facts:
THE COURT: You are excused, sir. Next witness.
(Defense Counsel): Allen Farris.
THE COURT: This witness has been in the courtroom.
(Defense Counsel): I don't think he was during the testimony.
(The State): Yes, he was.
(Defense Counsel): I am sorry, Your Honor.
Thereafter appellant called no other witnesses and rested his case in the punishment phase.
From the record before us it is clear that appellant made no objection to the trial court's contention that appellant's witness, Allen Farris, had violated the rule. See Tex. R.Crim.Evid. 613. Because appellant did not object to the attempted exclusion of his witness, he has failed to preserve points of error seven and eight for appellate review. Tex. R.App.P. 52(a). Points of error seven and eight are overruled.
Appellant's final two points of error complain that trial counsel failed to render effective assistance in violation of both federal and state constitutions. Although appellant has once again failed to clearly separate his arguments and authorities under each constitutional provision listed, we will address the issue of ineffective assistance of counsel as Texas' constitutional and statutory provisions regarding ineffective assistance cases are not more protective of a defendant's rights than the standard set forth under the United States Constitution as interpreted in Strickland v. Washington.[2]Hernandez v. State, 726 S.W.2d 53, 56-57 (Tex.Crim.App.1986).
Strickland is the seminal case with regard to ineffective assistance claims. To support such a claim, an appellant must prove: 1) that counsel's performance was deficient, and 2) that this deficient performance prejudiced his defense. Hernandez, 726 S.W.2d at 57. Consideration of the "totality of the representation," rather than isolated acts or omissions of trial counsel, determines whether sufficient proof of these two prongs has been made. Ex parte Kunkle, 852 S.W.2d 499, 505 (Tex.Crim.App.), cert. *868 denied, ___ U.S. ___, 114 S. Ct. 122, 126 L. Ed. 2d 87 (1993). Moreover, if an appellant fails to prove the prejudice component, the reviewing court need not address the question of counsel's performance. Strickland, 466 U.S. at 697, 104 S.Ct. at 2069, 80 L.Ed.2d at 699; Gamboa v. State, 822 S.W.2d 328, 330 (Tex.App.Beaumont 1992, pet. ref'd). The method for proving the prejudice component is spelled out as follows:
The defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome.
Strickland, 466 U.S. at 694, 104 S.Ct. at 2068, 80 L.Ed.2d at 698.
In the instant case, appellate counsel lists some seven allegations of "deficient performance" and then proceeds to show how each "omission" by trial counsel was deficient in its own way. However, appellate counsel does not begin to provide any evidentiary support for the showing that the result of the proceeding would have been different absent trial counsel's "omissions." The transcript before us reflects that appellant filed a motion for new trial. Said motion did not contain any mention of ineffective assistance of trial counsel. Furthermore, the full record before us reflects that no hearing was apparently ever requested by appellant on said motion. The motion was presumably overruled by operation of law. Appellate counsel could have aided this Court by insisting on a hearing on said motion thereby providing an evidentiary record to support the otherwise conclusory claims of prejudice to appellant stemming from the alleged deficiencies. See Tex.R.App.P. 30 & 31.
Having examined the seven deficiency allegations, we find that the one dealing with the failure to object to the DNA expert testimony is closest to being "per se" prejudicial if correct. Presumably, if trial counsel had managed to suppress the testimony that there was a 99.93% chance that it was the victim's blood covering appellant's boots, it could be said that confidence in the outcome of the trial had been sufficiently undermined.
Appellant contends that trial counsel failed to suppress the "novel scientific evidence testimony" in that trial counsel failed to insist that the State lay the proper predicate for admission of said testimony under the dictates of Kelly v. State, 824 S.W.2d 568 (Tex. Crim.App.1992). Appellant reproduces the specific predicate used in Kelly prior to the introduction of the DNA test results in that case. Appellant contends that none of the specific Kelly predicates were proven by the State in the instant case. It is clear to us, however, that appellant misreads the Court of Criminal Appeals' holding in Kelly. The Court in Kelly merely requires that the proffered expert testimony is reliable and relevant under the Texas Rules of Criminal Evidence. Id. at 572. The Court lists three criteria for determining whether novel scientific evidence is reliable: (a) the underlying scientific theory must be valid; (b) the technique applying the theory must be valid; and (c) the technique must have been properly applied on the occasion in question. Id. at 573.
In the instant case trial counsel expressly requested, under the provisions of Tex. R.Crim.Evid. 705(b), to conduct a voir dire examination of the State's DNA expert prior to her testifying to the results of any DNA testing she engaged in. The State's expert was vigorously questioned by trial counsel during said voir dire examination and during cross-examination in an attempt to raise questions as to the reliability of said expert's DNA testing procedures. An examination of trial counsel's questions to the State's DNA expert reveals some very incisive, pointed, and cogent queries.
It is clear to us that the particular description of the DNA testing process used by the expert in the Kelly case is but one way to satisfy the holding in Kelly requiring proof of reliability and relevancy. It is within the trial court's discretion to determine whether or not the proponent of the novel scientific evidence has satisfied his or her burden under Kelly. In the instant case, we find no deficiency on the part of trial counsel in the trial strategy and tactics employed in confronting the State's DNA expert. We *869 therefore overrule points of error nine and ten. Having overruled all points of error, the judgment and the sentence of the trial court are affirmed.
AFFIRMED.
NOTES
[1] See 18 U.S.C.A. § 2 (West 1969).
[2] 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984).
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219 A.2d 100 (1966)
James F. SWAILES, Appellant,
v.
DISTRICT OF COLUMBIA, Appellee.
Nos. 3835, 3836.
District of Columbia Court of Appeals.
Argued February 14, 1966.
Decided April 28, 1966.
*101 Thomas M. O'Malley, Washington, D. C., with whom Michael F. X. Dolan, Washington, D. C., was on the brief, for appellant.
David P. Sutton, Asst. Corporation Counsel, with whom Chester H. Gray, Corporation Counsel, Milton D. Korman, Principal Asst. Corporation Counsel, and Hubert B. Pair, Asst. Corporation Counsel, were on the brief, for appellee.
Before HOOD, Chief Judge, MYERS, Associate Judge, and CAYTON (Chief Judge, Retired).
MYERS, Associate Judge.
Appellant was tried by a jury on charges of operating a motor vehicle while under the influence of intoxicating liquor[1] and of reckless driving.[2] Concurrently he was tried by the court on charges of driving his car at an unreasonable speed[3] and of changing lanes without caution.[4] These charges were the result of appellant's arrest by two officers of the Metropolitan Police Department who had observed him operating his automobile on Sherman Avenue, N. W., on the evening of March 6, 1965. The jury found appellant not guilty of the two charges before them, while the trial judge found him guilty of the charges of unreasonable speed and of changing lanes without caution. Concurrent sentences, respectively, of 60 days in jail and of $10 or two days were imposed. These appeals ensued.
Appellant argues that the two misdemeanors of which he was found guilty by the court were lesser offenses included in the charge of reckless driving of which he was acquitted by the jury and that his convictions violated his safeguard against double jeopardy guaranteed by the Fifth Amendment to the Constitution of the United States. It is well settled that the case in which an accused may successfully plead former jeopardy must be identical in law and in fact with a former case in which he was put in jeopardy; or where one offense is alleged to be a lesser offense included as part of another, the evidence required to prove both is the same. Davenport v. District of Columbia, D.C. *102 Mun.App., 61 A.2d 486, 490 (1948). This principle does not mean that only one offense and one charge can arise from a single set of facts. Randolph v. District of Columbia, D.C.Mun.App., 156 A.2d 686, 687 (1959).
It is manifest that unreasonable speed and changing lanes without caution are not essential elements of reckless driving but are distinct and separate offenses, and the same evidence is not required to prove the two charges. To sustain the charge of reckless driving, the government must show that appellant operated his automobile in a careless manner, with heedless disregard of the consequences; to prove the charges of unreasonable speed and of changing lanes without caution, it is necessary to establish that appellant exceeded the posted speed limit or was driving at a speed not commensurate with the exercise of proper care at the time and under the circumstances then existing and that he failed to ascertain whether he could move to another traffic lane with safety. Excessive speed and violation of a traffic regulation do not per se constitute reckless driving, for it is possible to drive well within the prescribed speed limit and still be a menace to the safety of others.[5] In our opinion acquittal by the jury of the charge of reckless driving did not preclude a finding of guilty by the court on the charges of unreasonable speed and of changing lanes without caution.[6] We find no valid basis for appellant's claim of double jeopardy.
Appellant also contends there was insufficient competent evidence upon which to base his convictions. He charges that the testimony by the two arresting officers was conflicting and did not meet the requirement of proof beyond a reasonable doubt. The record does not support this contention. The differences in their testimony were insubstantial and immaterial. That the trial judge chose to believe the statements of the police officers rather than the denials of appellant with reference to the charges of unreasonable speed and of changing lanes without caution does not compel reversal, for the record contains substantial evidence to support the convictions. Haynes v. District of Columbia, D.C.App., 202 A.2d 919 (1964); Burroughs v. United States, D.C. Mun.App., 163 A.2d 830 (1960). As trier of fact, his conclusions will not be disturbed on appeal unless clearly erroneous. Although the jury found appellant not guilty of the two charges tried by them, a like determination by the trial judge of the factual issues surrounding the two other offenses was not required.
Appellant alleges error in the court's refusal to issue a subpoena duces tecum for the production of certain testimony taken at a hearing before the Department of Motor Vehicles relating to the same offenses for which he was on trial. Appellant's asserted purpose in requesting the subpoena was to impeach the testimony at trial of one of the arresting police officers denying he had earlier stated that, from his observation of appellant's eyes at the time of his arrest, he had concluded appellant was under the influence of alcohol. The court rejected appellant's request on the ground that the testimony was merely cumulative since there was other evidence upon which the officer could have concluded appellant was intoxicated. A request for the issuance of a subpoena duces tecum is directed to the court's discretion. United States v. Carter, 15 F.R. D. 363 (D.C.D.C.1954). Such a subpoena may be used during the course of a trial to obtain testimony to discredit an adverse witness, but before the court will invoke its discretion and direct the issuance of such a subpoena, a foundation for the introduction of impeachment evidence must be laid. This requires that the attention *103 of the witness be directed to the time, place and circumstances when the statements were supposed to have been made so that the witness can deny or explain them. Gordon v. United States, 53 App.D.C. 154, 289 F. 552 (1923). Here the record indicates that counsel for appellant failed to lay the requisite foundation and show the necessity for the issuance of the subpoena. We rule the court did not abuse its discretion in refusing to issue the subpoena.
Finally, appellant argues that the sentences imposed by the trial judge were motivated by bias and prejudice and should be vacated. The probation officer's report to the trial judge, which detailed appellant's prior traffic record, contained the comment that "* * * this man having been under the influence of liquor when this offense took place (however, he was found not guilty of Driving While Drunk), it would appear that [he] has forfeited all right to further consideration with respect to probation * * *." Appellant asserts that this recommendation so prejudiced the sentencing judge that in effect he was sentenced for driving while under the influence of intoxicating liquor. There is nothing in the record to support such a charge. Without proof, we have no right to speculate that the trial judge was biased or prejudiced in imposing sentences. The sentences were within the limit prescribed by the applicable statute or regulation[7] and are not subject to review or control by this court. Stovall v. United States, D.C.App., 202 A.2d 390 (1964). See also Gillard v. United States, D.C.App., 202 A.2d 776 (1964); Seidenberg v. District of Columbia, D.C.Mun.App., 71 A.2d 607 (1950); Dawson v. District of Columbia, D.C.App., 217 A.2d 664 (1966).
Affirmed.
HOOD, Chief Judge (dissenting).
This case has one feature which disturbs me. As shown by the majority opinion, appellant was found not guilty on charges of driving while under the influence of intoxicating liquor and reckless driving. After that acquittal the trial court found appellant guilty of charges of unreasonable speed and changing lanes without caution, and ordered a probation report before sentencing.
The probation report submitted to the court included a rather lengthy record of prior traffic convictions and a personal history of appellant, showing that he is forty-one years of age, is married, and is living with his wife and three children, who are attending school. Other matter contained in the report was, in my opinion, highly improper and prejudicial to appellant.
The report, under the heading of statement of facts, contained a report made by a police officer on the date appellant was arrested. This report stated the following:
The defendant was asked to get out of the car. When doing so, he was unsteady on his feet and had a strong odor of alcohol on his breath. The defendant was then transported to the 10th. Precinct and was charged with Unreasonable Speed, Changing Lanes Without Caution, Reckless Driving, Driving While Drunk. The defendant was asked if he wanted to give urine specimen and he said yes. While in the men's room, he tried to put fresh water into the bottle instead of his urine. So after that, he would not give any specimen.
The probation report concluded with the following:
This defendant was brought in today for personal interview. As a result of interview and review of the entire situation, this man having been under the influence of liquor when this offense took place (however, he was found not *104 guilty of Driving While Drunk), it would appear that this man has forfeited all right to further consideration with respect to probation in this case.
It further appears that he has reached the point where he must realize the hard way that his rights stop precisely where others' begin. He is a menace on the highway.
Probation is not recommended.
It appears very plain to me that the probation report in effect stated that although the jury had acquitted appellant of the charge of driving while under the influence of liquor, he was in fact guilty of that offense and should be so considered. This was highly improper. The charge of driving under the influence had been disposed of by the jury, and it was then not the subject of consideration by either the court or the Probation Officer.
The probation report brought to the attention of the court that appellant had refused to submit to a urine test, but our statute, D.C.Code 1961, § 40-609a, authorizing such tests, specifically provides that no one is required to submit to such test. We have held that refusal to submit cannot be used against the defendant, Stuart v. District of Columbia, D.C.Mun.App., 157 A.2d 294 (1960); but it was used here by the Probation Officer to bolster his conclusion that appellant was a "menace on the highway," and must learn "the hard way" where his rights stop and the rights of others begin.
The majority opinion says it would be speculation to assume that the probation report improperly influenced the court in imposing sentence, but two facts stand out very plain. First, the court imposed a sentence of sixty days in jail on the charge of unreasonable speed, and it seems to me that this is an unusually severe sentence for such offense when it is remembered that the jury had acquitted appellant of the charge of reckless driving. Second, the trial court on its own motion designated as a part of the record in this case the informations charging driving while under the influence of intoxicating liquor and reckless driving, and the probation report. If the charges of which appellant was acquitted and the contents of the probation report did not influence the court in imposing sentence, why did the court include them in the record?
I would reverse the convictions and order a new trial before another Judge.
NOTES
[1] D.C.Code, 1961, Sec. 40-609(b).
[2] D.C.Code, 1961, Sec. 40-605(b).
[3] D.C.Code, 1961, Sec. 40-605(a); Traffic and Motor Vehicle Regulations, Part I, Article VI, Sec. 22(a).
[4] Traffic and Motor Vehicle Regulations of the District of Columbia, Part I, Article VII, Sec. 32(a).
[5] Wharton, Criminal Law and Procedure, Secs. 1000-1001 (1957).
[6] Compare Busbee v. State, 183 So. 2d 27 (Fla.App.1966).
[7] D.C.Code, 1961, Sec. 40-605(d); Traffic and Motor Vehicle Regulations of the District of Columbia, Part I, Article XX, Sec. 158.
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219 A.2d 471 (1966)
Albert W. FISKE
v.
Jennie Concetta MARINO.
Ex. No. 10827.
Supreme Court of Rhode Island.
May 18, 1966.
Aram A. Arabian, Manuel A. DeCarvalho, Providence, for plaintiff.
Gunning & LaFazia, Bruce M. Selya, John D. Lynch, Providence, for defendant.
KELLEHER, Justice.
This action of trespass on the case for negligence is before us on the defendant's exceptions to the decisions of a superior court justice denying two motions to set aside a default judgment and reinstate the case for trial.
It appears from the record that plaintiff is a member of the Rhode Island state police who, in the performance of his duties on February 24, 1963, sustained multiple injuries which he alleges resulted from defendant's negligent operation of a motor vehicle on Nooseneck Hill road in the town of West Greenwich.
On February 4, 1965, a writ of summons was duly served on the registrar of motor vehicles in this state, the required fee was paid, and thereafter notice of such service together with a copy of the writ was sent by registered mail to defendant at 58 Milk street, North Andover, Massachusetts, the *472 address as shown on her registration certificate all as provided in G.L. 1956, § 31-7-7, as amended. See Appendix I.
The writ, returnable March 17, 1965, was duly entered and plaintiff filed his declaration together with proof that the required notice and copy of the process had been sent to defendant by registered mail. The notice and copy of the writ were returned to plaintiff's attorney, however, postal cancellations on the envelope showing several unsuccessful efforts by the postal department to deliver the correspondence to defendant.
The case, unanswered, was called May 17, 1965 and, defendant not appearing, it was continued to June 8, 1965 at which time, on oral proof of damages, a nil dicit judgment in the sum of $3,400 was entered for plaintiff.
On August 27, 1965, defendant filed the first of two motions to set aside the judgment and reinstate the case as provided by G.L. 1956, § 9-21-2. See Appendix II.
This was accompanied by defendant's affidavit setting forth that she had never received notice of the pending action nor a copy of the writ; that she did not know of the action until after the entry of judgment as aforesaid; that in February 1965 she was no longer residing at the North Andover address, which was the home of her mother who was in Florida from January through March 1965; and that her own address at the time was 366 Old Colony Road, Norton, Massachusetts.
Her affidavit also stated that she had a meritorious defense which she wished in good faith to present at a trial, if one were had. Her statements in this regard, however, are mere expressions of opinion or conclusions and do not constitute allegations of fact which if established would tend to affect the outcome of a trial. As such they fall short of the requirement held to be essential by this court in Milbury Atlantic Mfg. Co. v. Rocky Point Amusement Co., 44 R.I. 458, 118 A. 737; Nelen v. Wells, 45 R.I. 424, 121 A. 394, and Pono v. Cataldo, 89 R.I. 242, 152 A.2d 99, among others.
The motion was also accompanied by an affidavit of her attorney which, on information and belief, alleged facts upon which a determination of a prima facie defense could be made. Holding as a matter of law that this latter affidavit did not constitute compliance with the statute, the superior court justice denied the motion at a hearing held September 20, 1965. From that decision defendant seasonably prosecuted her bill of exceptions to this court.
Thereafter, however, on October 21, 1965, she filed a second motion in the superior court, supplemented by her affidavit restating lack of knowledge as to the pendency of the action and setting forth allegations of fact relative to a meritorious defense. This motion was heard on November 15, 1965 and denied by the superior court justice on the ground that no cause had been shown. From that decision defendant duly prosecuted a second bill of exceptions which, because of the view that we take of the September 20, 1965 decision, requires no consideration and is therefore dismissed pro forma.
Before turning to a consideration of her first bill of exceptions, we deem it advisable to comment on the unusual if not irregular procedures adopted by defendant. The plaintiff has not raised the question of whether § 9-21-2 will support a succession of motions with each adverse decision thereon open to review in this court. Nor has defendant so much as suggested affirmative support for such a proposition. If explored, the question might conceivably prove troublesome. Be that as it may, however, and notwithstanding our right to a contrary course of action, we deem it advisable in this instance to leave the question unanswered while sounding a cautionary note that the practice, if permissible, should not be put to common use.
In passing on defendant's first motion, the superior court justice concerned himself *473 soley with the competency of the evidence before him bearing on the issue of a meritorious defense. Concluding that the affidavit of defendant's counsel did not comply with the requirement of the statute in this regard, he gave no consideration to the question of whether cause had been shown. Since we believe that defendant should have prevailed on her first motion, it becomes necessary for us to consider whether cause and a prima facie meritorious defense were established. See McLeod v. Fleetwood Motor Sales Inc., 83 R.I. 447, 118 A.2d 921; Pono v. Cataldo, supra, and Pettis v. Henderson, 91 R.I. 191, 162 A.2d 540.
In a long line of decisions this court has repeatedly held that a motion to set aside a default judgment is addressed to the judicial discretion of the court having jurisdiction of the litigation and a decision therein will not be disturbed except for an abuse of discretion or an error of law. Fox v. Artesian Well & Supply Co., 34 R.I. 260, 83 A. 115; Roy v. Tanguay, R.I., 131 A. 553; Borden v. Briggs, 49 R.I. 207, 142 A. 144; Vingi v. Vigliotti, 63 R.I. 9, 6 A.2d 719; Vitullo v. Ambrosino, 77 R.I. 84, 73 A.2d 764, 21 A.L.R. 2d 861.
We turn then to a consideration of the superior court justice's determination that the affidavit of defendant's attorney did not comply with the provisions of the statute. It is apparent from his decision that he entertained no doubt as to the sufficiency of circumstances set forth. Rather, he was motivated by the fact that they were not within the personal knowledge of defendant's attorney. Indeed, in McLeod v. Fleetwood Motor Sales Inc., supra, this court in reversing a superior court justice's decision granting the motion made note of the fact that the statements of the defendant's attorney were not based on personal knowledge. However, the statements were also mere conclusions. Neither were they under oath. It seems clear from a careful reading of the case that, had counsel's statements been material to a defense and made under oath, our decision would have been otherwise. See also Harrington v. Harrington, 66 R.I. 363, 19 A.2d 315, where this court, in approving as competent counsel's statements made to the superior court justice, observed that the unavailing objection thereto was to the form rather than to the substance.
Counsel for a movant in these cases is an officer of the court, very likely cognizant of the facts upon which his client's defense would be based, and his statement thereof made under oath should, we believe, be accepted as competent. Manifestly, the better practice would be to supplement the motion with the party's own affidavit but in the circumstances here present it is our judgment that the superior court justice erred in rejecting the affidavit of counsel.
There remains the question of whether defendant has shown cause such as to call for a favorable exercise of judicial discretion. As heretofore noted the superior court justice did not pass upon this question, but whereas here the probative facts are not in dispute this court is in as good a position to pass upon them as was the superior court justice. See Cobb's Inc. v. Fitzpatrick, 61 R.I. 1, 199 A. 614.
It appears from an affidavit supplied by plaintiff's attorney that at least for two months prior to the calling of the case for trial he had been in communication with defendant's insurer. Although he states that he believes the last such communication to have been after the writ was entered and further believes recalling that he so advised defendant's insurer, this affidavit was not before the judge who entered the nil dicit judgment. If it had been, there is every likelihood that the case would have been continued for the purpose of giving notice, at least to defendant's insurer, that the case was ready for trial.
We are moved to make this observation because of a very pertinent provision of § 31-7-7, as amended (Appendix I). After setting forth the procedures governing substitute service on nonresident motor vehicle *474 operators, the statute provides, "The court in which the action is pending may order such continuances as may be necessary to afford the defendant reasonable opportunity to defend the action."
We think it obvious that the legislature, recognizing that notice to a defendant of service on the registrar might not always be expeditiously consummated, intended to provide against a hasty foreclosure of a nonresident's right to be heard.
In the case at bar it is clear from the affidavit of plaintiff's attorney, executed after the entry of the nil dicit judgment, that defendant need not have been defaulted had the court been aware that her insurer was known and could be readily notified.
The safeguard against incautious defaulting of a nonresident operator intended by § 31-7-7, as amended, proving unavailing here, we are constrained to hold that the defendant has shown such cause as warrants relief under the applicable statute.
The plaintiff, however, should not be made to suffer because we have afforded relief to the defendant. The plaintiff should be reimbursed for the expense of the proceedings in the superior court wherein the defendant was defaulted and the motions related thereto as well as for the expense of preparing the brief and appearing in this court.
The defendant's exception to the denial of her first motion to vacate the default judgment rendered against her is sustained, and the case is remitted to the superior court with direction to set aside the judgment and reinstate the case for trial provided the defendant shall pay the plaintiff's costs and a counsel fee of $350 on or before June 10, 1966; otherwise the defendant's exception is overruled.
APPENDIX I
§ 31-7-7 as amended. "Service on nonresident. Service of such process shall be made by leaving a copy of the process with a fee of five dollars ($5.00) in the hands of the registrar of the registry or in his office with some one acting in his stead as such registrar and such service shall be sufficient service upon the said nonresident; provided, that notice of such service and a copy of the process shall be forthwith sent by registered or certified mail by the plaintiff or his attorney of record to the defendant at the address given upon said defendant's registration or operator's license, and the sender's post office receipt of sending and the plaintiff's or his attorney's affidavit of compliance herewith are appended to the process and entered with the declaration or that such notice and a copy of the process are served upon the defendant by leaving the same in his hands or possession by a duly constituted public officer qualified to serve civil process in the state or jurisdiction where the defendant is found, and such officer's return showing such service to have been made at least fifteen (15) days before the return day of the process is appended to the process and entered with the declaration. The court in which the action is pending may order such continuances as may be necessary to afford the defendant reasonable opportunity to defend the action. * * *"
APPENDIX II
§ 9-21-2. "Control retained over judgment or decree, In case of judgment by default, or in case of judgment entered by mistake, or in case of decrees in all equity causes and causes following the course of equity, the court entering the same shall have control over the same for the period of six (6) months after the entry thereof, and may, for cause shown, set aside the same and reinstate the cause, or make new entry and take other proceedings, with proper notice to parties, with or without terms, as it may direct by general rule or special order."
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886 S.W.2d 829 (1994)
Ex parte Rebecca MORGAN.
No. 07-94-0262-CV.
Court of Appeals of Texas, Amarillo.
October 18, 1994.
*830 Conant, Whittenburg, Whittenburg & Schachter, George Whittenburg, Karl L. Baumgardner, Amarillo, for appellant.
Moore, Lewis & Russwurm, Kyle Lewis, Dumas, for appellee.
Before REYNOLDS, C.J., and BOYD and POFF, JJ.
BOYD, Justice.
In this original habeas corpus proceeding, relator Rebecca Morgan (Morgan) seeks relief from an order of the trial court finding her in contempt and ordering her confinement in the county jail of Dallam County for a period of thirty (30) days and until she paid court costs and an attorney's fee of $688.00.
On July 13, 1992, Morgan and Robert Scherer (Scherer) were divorced in the 69th District Court of Dallam County. In the divorce decree, Morgan was awarded custody of the two minor children born to the marriage with Scherer being named as possessory conservator. Scherer was granted the standard visitation rights as provided by section 14.033 of the Texas Family Code. Subsection (b) of that section provides:
(b) Mutual Agreement or Specified Terms for Possession. The court shall expressly state in a standard order that the parties may have possession of the child at any and all times mutually agreed to in advance by the parties and, in the absence of mutual agreement, shall have possession of the child under the specified terms set out in the standard order.
Tex.Fam.Code Ann. § 14.033(b) (Vernon Supp.1994).
On September 2, 1993, the district court held Morgan in contempt for allegedly refusing Scherer visitation with the children. As a result of that contempt, the court sentenced her to a period of thirty (30) days confinement in the Dallam County jail. Confinement was suspended, however, provided that Morgan "comply fully and completely with all court-ordered periods of visitation in the future as previously specified."
On or about July 18, 1994, Scherer filed a motion seeking to revoke the order suspending Morgan's confinement and to enforce the visitation order. In that motion, Scherer alleged that on July 1, 1994, Morgan denied him his extended summer visitation with the children. The motion proceeded to hearing on August 11, 1994.
At the conclusion of the hearing, the trial judge orally announced his finding that Morgan was in contempt of court. As a result, the trial judge revoked the previously ordered suspension of commitment and ordered Morgan confined to the Dallam County jail for a period of thirty (30) days and "so long thereafter until [she] paid attorney fees in the amount of $688.00."
The record also contains a certified copy of the trial court's order directing the Dallam County sheriff to take custody of Morgan pursuant to its contempt finding. The document also indicated that a "Complete written Order and Commitment [would] follow." The order was dated August 11, 1994, but was not filed in the District Clerk's office until August 23, 1994. The sheriff's return on the instrument is blank.
The record also contains a certified copy of an instrument denominated "Order Revoking Suspension and for Commitment to County *831 Jail" dated August 15, 1994 and filed in the District Clerk's office on August 16, 1994. In that document, the trial judge specified the order it found Morgan had violated and the manner in which it was violated. The document also ordered, as punishment for her violation, that Morgan be committed to the custody of the Dallam County sheriff for service of the punishment assessed.
In his August 15, 1994 order, the trial court detailed, as the basis for its finding that Morgan contemptuously failed to comply with visitation orders, that:
The parties reached an agreement that Robert Lee Scherer would pick up the children for his extended summer visitation with the children on July 1, 1994, at 9:00 a.m. When Robert Lee Scherer arrived the children were not ready to leave. Their bags were not packed. Robert Lee Scherer and Rebecca Sue Morgan agreed that Robert Lee Scherer would return at noon the same day to pick up the children. When Robert Lee Scherer returned at noon the children refused to go and Rebecca Sue Morgan did nothing to insist that the children accompany Robert Lee Scherer for his visitation period. Robert Lee Scherer told Rebecca Sue Morgan he would return at 6:00 p.m. that same day to pick up the children for his visitation period to give Rebecca Sue Morgan an opportunity to prepare the children for visitation. When Robert Lee Scherer returned at 6:00 p.m. on July 1, 1994, to pick up the children for his summer visitation, the children were not ready, refused to go with him and Rebecca Sue Morgan did nothing to insist the children accompany Robert Lee Scherer for his extended summer visitation with the children. (emphasis added)
After that recitation of fact, the judge went on to conclude that Morgan had denied Scherer his summer visitation with the children "particularly when [she] left the decision of whether to attend visitation solely with the children."
This proceeding arises out of a problem too often before the courts of this state and the efforts of a conscientious trial judge to solve that problem. It demonstrates the all too common situation of continuing hostility between two divorced parents who refuse to resolve their differences and fail to recognize the inevitable effect their actions have upon their children. It is a truism that the dissolution of the marriage does not discharge a parent's responsibility to submerge his or her own personal feelings in order to fulfill the all important task of ensuring that the children of the marriage share a healthy relationship with each parent. In fact, the dissolution of the marriage not only reinforces that responsibility, but also imposes upon the parents the more difficult and onerous task to carry out the law's mandate that both parents have a proper opportunity to visit with and reinforce the love and affection of their children. Nothing in this record indicates that either parent is an improper person to aid in the upbringing of their children. It is imperative that both parents recognize that their personal feelings must be submerged in carrying out their responsibility to obey the law and, by doing so, demonstrate to their children that they should do so as well.
Even so, this proceeding must be decided upon the record before us and the law appertaining to that record. In Ex parte Strickland, 723 S.W.2d 668 (Tex.1987), the Texas Supreme Court held that due process in this type of case requires both a written judgment of contempt and a written order of commitment in order to punish a person. Id. at 669.
In Ex parte Calvillo Amaya, 748 S.W.2d 224 (Tex.1988), the court held that a trial court has no authority to order a person confined for contemptuous conduct committed outside the presence of the court unless the court does not "unduly delay" signing both a contempt judgment and a commitment order. Id. The court went on to comment that a contemnor might be detained for a "short and reasonable time" while the judgment of contempt and the order of commitment are being prepared. Id. at 225. However, the court held a three-day delay between the contemnor's delivery for confinement and the execution of the written judgment and commitment was not a "short and reasonable time" and, thus, violated due process requirements. Id. Likewise, in McMillian *832 v. State, 865 S.W.2d 459 (Tex.Crim.App. 1993), the court, citing the Amaya case, again held that a contempt order was void because it was not reduced to writing and signed until three days after confinement. Id. at 460.
The documents in this case show beyond cavil that the contempt judgment was not executed until August 15, 1994, some four (4) days after the hearing and oral order of commitment. Additionally, on August 12, 1994, this court granted the writ of habeas corpus and ordered Morgan released on bond. When this court granted the writ and ordered Morgan released on bond, our jurisdiction over her attached to the exclusion of any other court, including the committing court. Ex parte Barnett, 600 S.W.2d 252, 256-57 (Tex.1980).
Therefore, we must hold, under the Amaya and McMillian decisions, that the four day delay in the execution of the written contempt judgment in this case violated due process requirements, thereby voiding the judgment. Additionally, the judgment is void as it was executed at a time when this court had attained exclusive jurisdiction over Morgan. As we have noted above, a trial court has no authority to order the confinement of an alleged contemnor without both a valid written judgment and a valid written commitment order. That being true, Morgan is ordered discharged from custody and the sureties on her appearance bond are discharged from liability.
Parenthetically, we note the provision in the court's order attempting to confine Morgan in the county jail until she paid the attorney fee assessed. This court held in Ex parte Rogers, 633 S.W.2d 666 (Tex.App. Amarillo 1982, no writ), that the payment of attorney's fees assessed in matters other than those involving child support delinquencies may not be enforced by contempt. Id. at 671.
Our above holding would ordinarily obviate the necessity for further discussion. However, both parties have asked that we discuss the question of whether a managing conservator, such as Morgan, may be held in contempt for a failure to, if necessary, bodily deliver possession of minor children to a possessory conservator, such as Scherer. Because of that request, the paucity of authority on the question, and the likelihood that the question may reoccur, we will consider the issue.
Under the law, and this court order, Scherer was entitled to possession of the children during specified visitation periods. Morgan would be subject to contempt proceedings if she overtly or covertly sought to impede Scherer's taking possession of the children for his visitation. However, in this case, the trial judge did not find that she acted in such a manner. Rather, his finding was that Morgan's passive conduct amounted to a denial of visitation. The evidence shows that Morgan did have the children and their baggage present at the agreed location for Scherer to take possession of them. Under this record, Morgan's passivity was not punishable by contempt.
We reiterate, however, that if the evidence in such a proceeding shows that a parent has encouraged minor children to resist court ordered visitation with the other parent, the line has been crossed between passivity, which is not punishable by contempt, and overt conduct, which would be punishable. Again, the well-being of the children is served by both parents' encouragement to the children to love and respect the other parent.
Reiterated, we must grant the writ. Morgan is discharged from confinement and the sureties on her bond discharged from liability.
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679 F. Supp. 785 (1988)
Donald P. DeFRANCESCO, Plaintiff,
v.
Otis R. BOWEN, M.D., Secretary of Health and Human Services, Defendant.
No. 87 C 5091.
United States District Court, N.D. Illinois, E.D.
February 24, 1988.
*786 Frederick J. Daley, Frederick J. Daley, Ltd., Chicago, Ill., for plaintiff.
Anton R. Valukas, U.S. Atty. by Thomas P. Walsh, Asst. U.S. Atty., Donna Morros Weinstein, Chief Counsel, Region V by Felisia Wesson, Asst. Regional Counsel, Dept. of Health and Human Services, Chicago, Ill., for defendant.
ORDER
BUA, District Judge.
Before this court are both parties' motions for summary judgment in a Social Security disability benefits case. For the reasons stated herein, defendant's motion is granted, and plaintiff's motion is denied.
I. FACTS
Plaintiff is a 50-year-old man with a high school education. He worked as a truck driver from 1957 to 1984. Between 1978 and 1984 plaintiff held a variety of delivery and service jobs which he allegedly was forced to leave because of his failing health. On October 16, 1985, plaintiff filed an application for Social Security disability benefits. The application alleged that plaintiff became disabled on February 21, 1984 by reason of two heart attacks, diabetes, and numbness in his feet and legs.
At an administrative hearing held on October 16, 1985, testimony was presented by plaintiff, plaintiff's son, and a medical advisor. Various medical reports prepared by physicians who examined plaintiff were also introduced. Based on the testimony and medical reports, the Administrative Law Judge ("ALJ") found that plaintiff's conditions, whether considered individually or in combination, do not equal the level of severity required for a finding of disability under the listing of impairments ("listings") contained in Subpart P, Appendix 1, of the regulations, 20 C.F.R. §§ 404.1520(d), 416.920(d). In light of the evidence offered at the hearing, the ALJ determined that although plaintiff is precluded from doing his past relevant work, he retains the residual functional capacity to perform a full range of light work. Considering plaintiff's vocational factors, the ALJ relied on the medical-vocational guidelines ("grid") which directed a finding of not disabled. The Secretary of Health and Human Services' ("Secretary") Appeals Council denied plaintiff's request to review the ALJ's findings. Thus, the ALJ's ruling became the final decision of the Secretary.
II. DISCUSSION
To qualify for disability benefits, a person must be "unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment ... lasting at least a year." 42 U.S.C. § 416(i). The impairment "must be of such severity that [the applicant] is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy...." 42 U.S.C. §§ 423(d)(1)(A), (2)(A). The burden is on the claimant to demonstrate that he is no longer capable of performing his past relevant work. Wilkinson v. Schweiker, 640 F.2d 743, 744 (5th Cir.1981). If this burden is satisfied by the claimant, the burden shifts to the Secretary to show that the claimant is capable of engaging in some type of gainful activity. Ferguson v. Schweiker, 641 F.2d 243, 246 (5th Cir.1981).
The role of a court reviewing a denial of Social Security benefits is limited to a determination of whether substantial evidence supports the Secretary's decision. 42 U.S.C. § 405(g). Substantial evidence means such evidence that a reasonable mind would accept as adequate to support a conclusion. Richardson v. Perales, 402 U.S. 389, 401, 91 S. Ct. 1420, 1427, 28 L. Ed. 2d 842 (1971). In applying this test, a court is bound to consider the factual findings by the Secretary conclusive if supported by substantial evidence. 42 U.S.C. § 405(g).
Plaintiff first asserts the Secretary's finding that he is capable of light work is not supported by substantial evidence. According to the definition of light work, a claimant must be able to perform substantially all of the following activities:
*787 1) lifting no more than 20 pounds with frequent lifting or carrying of objects weighing up to 10 pounds;
2) walking and standing for substantial periods of time; and/or
3) sitting for extended periods with some pushing and pulling of arm or leg controls.
20 C.F.R. § 404.1567(b).
Contrary to plaintiff's assertions, a review of the testimony and records offered at the hearing indicates substantial support for the Secretary's determination. Plaintiff testified at the hearing that he is capable of frequently lifting 20-30 pounds. Medical reports introduced at the hearing indicated that plaintiff possesses the ability to stand and sit approximately six hours out of an eight-hour work day. Moreover, the medical advisor testified that plaintiff's conditions would not prevent him from performing the walking required for light work. The medical advisor also opined that plaintiff could do a job which required some pushing or pulling of arm or leg controls.
Plaintiff, however, contends the Secretary's decision failed to recognize certain critical evidence. At the administrative hearing, plaintiff testified that due to pain in his ankles, he is unable to walk more than the distance of a block or drive more than a distance of 17 miles. As plaintiff's testimony demonstrated he is incapable of substantially performing many of the activities required for light work, plaintiff argues a finding of disability was mandated.
An examination of plaintiff's testimony at the hearing shows that plaintiff made various inconsistent claims concerning pain and his ability to walk. In addressing plaintiff's testimony, the ALJ discussed plaintiff's inconsistent statements and determined plaintiff's assertions concerning his physical abilities lacked credibility. As such, the ALJ relied primarily on the medical records and testimony of the medical advisor in making his findings under 20 C.F.R. § 404.1567(b).
An ALJ's credibility findings are entitled to considerable weight and are not to be overturned unless clearly erroneous. Imani v. Heckler, 797 F.2d 508, 512 (7th Cir. 1986). The record in this case reveals that on two occasions, plaintiff made conflicting statements concerning chest pain and his ability to walk. Given these facts, the ALJ's credibility finding cannot be disturbed. In the present case, testimony and medical records presented at the hearing show that plaintiff is capable of the activities which characterize light work. The Secretary's findings regarding plaintiff's physical capabilities are thus supported by substantial evidence.
Next, plaintiff argues the Secretary improperly applied the grid in determining that plaintiff is not disabled. Plaintiff alleges that given the testimony concerning his nonexertional impairments, the Secretary's use of the grid was inappropriate and testimony from a vocational expert was necessary to ascertain whether plaintiff is capable of performing a full range of light work.
The grid is a set of guidelines designed to assist in determining whether a significant number of jobs exist in the national economy which a claimant can perform when he cannot return to his past relevant work. Warmoth v. Bowen, 798 F.2d 1109, 1110 (7th Cir.1986). Normally, application of the grid is proscribed in cases where the claimant has solely nonexertional types of impairments. 20 C.F.R. Part 404, Subpart P, App. 2 § 200.00(e)(1). However, the fact that a claimant has a nonexertional impairment does not immediately preclude utilization of the grid. Application of the grid is inappropriate only in cases where a claimant's nonexertional impairments significantly restrict the full range of gainful employment at a designated level. Johnson v. Bowen, 648 F. Supp. 443, 448 (N.D.Ill.1986) citing Nelson v. Secretary of Health and Human Services, 770 F.2d 682, 685 (7th Cir.1985).
In the present case, the only alleged nonexertional impairment is pain. As previously noted, plaintiff's assertions of pain were found to lack credibility. Weighing plaintiff's assertions of pain in light of his prior inconsistent statements, the Secretary *788 determined that the range of light work plaintiff is capable of performing is only slightly reduced by his pain. Because the Secretary was entitled to find under the facts in this case that the pain experienced by plaintiff is not of sufficient severity to restrict a full range of light work, the Secretary did not err in using the grid. Even with a slight reduction for pain, the grid shows a significant number of jobs in the light work category remain open to plaintiff. Thus, use of the grid was appropriate.
III. CONCLUSION
Because the Secretary's denial of benefits is supported by substantial evidence and the use of the grid was appropriate, the Secretary's decision is affirmed. Accordingly, defendant's motion for summary judgment is granted, and plaintiff's motion is denied.
IT IS SO ORDERED.
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